This paper reevaluates the cross-sectional effect of institutional ownership on idiosyncratic volatility by conditioning on institutions' investment horizon. Prior literature establishes a positive link between growing institutional ownership and idiosyncratic volatility. However, this effect may vary depending on the type of institutional ownership. We document that short-term (long-term) institutional ownership is positively (negatively) linked to idiosyncratic volatility in the cross section. These opposite effects persist after controlling for institutional preferences and information-based trading and remain qualitatively unchanged after controlling for endogeneity. This suggests that short-term (long-term) institutions exhibit higher (lower) trading activity, which increases (decreases) idiosyncratic volatility.1 Brandt et al. (2010) show that by 2003, aggregate IV had decreased to pre-1990s levels. They find no evidence that institutional investors caused the increase in IV in early 2000. As such, the authors conclude that the increase could have been caused by retail investors. 2 See Jones and Lipson (2003) and Kaniel et al. (2008) for evidence of institutional investor dominance in the financial market. 3 See Karpoff (1987) for a review on the early literature in this area. His synthesis of previous research concludes that while there is a positive correlation between the absolute value of price changes and volume, the relation between price changes per se and volume is non-monotonic and asymmetric (i.e., the correlation between volume and positive price changes is positive, while that between volume and negative price changes is negative). Schwert (1989) and Gallant et al. (1992) also provide good reviews of the empirical and theoretical research in this area.