Institutional Investment Constraints and Stock Prices

Cao, Jie; Han, Bing; Wang, Qinghai

doi:10.1017/s0022109017000102

Cited by 34 publications

(17 citation statements)

References 54 publications

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“…More generally, our paper is related to the literature that describes various frictions, taste considerations, and other distractions that influence the investment decisions of institutional investors, e.g., Almazan, Brown, Carlson, and Chapman (2004), Fama and French (2007), Cao, Han, and Wang (2017), Lewellen (2011). Our analysis is particular close to Edelen, Ince, and Kadlec (2016), which also examines the extent to which institutional trades are consistent with the quantitative signals that have been proposed in the academic literature.…”

Section: Introductionmentioning

confidence: 84%

ESG Preference, Institutional Trading, and Stock Return Patterns

Cao

Titman

Zhan

et al. 2020

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Trading". All errors are our own. Sheridan Titman acknowledges that he has had consulting arrangements with institutions that use some of the strategies described in this paper. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

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Section: Introductionmentioning

confidence: 84%

ESG Preference, Institutional Trading, and Stock Return Patterns

Cao

Titman

Zhan

et al. 2020

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“…A number of previous studies demonstrate that institutional investors are reluctant to deviate from their benchmarks due to both risk management constraints and reputational concerns (e.g., Arnott (), Almazan et al. (), Maug and Naik (), Cao, Han, and Wang ()). In particular, risk budgeting and asset allocation rebalancing would cause some institutional investors to reduce their equity risk exposure when sentiment is decreasing either by shifting from risky stocks to safer stocks or by shifting away from equities.…”

Section: What Drives the Relation Between Institutions’ Demand And Sementioning

confidence: 99%

Sentiment Metrics and Investor Demand

DeVault¹,

Sias²,

Starks

2019

The Journal of Finance

133

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Recent work suggests that sentiment traders shift from safer to more speculative stocks when sentiment increases. Exploiting these cross-sectional patterns and changes in share ownership, we find that sentiment metrics capture institutional rather than individual investors' demand shocks. We investigate the underlying economic mechanisms and find that common institutional investment styles (e.g., risk management, momentum trading) explain a significant portion of the relation between institutions and sentiment. THE INVESTOR SENTIMENT LITERATURE TYPICALLY assumes that irrational individual investors are the source of sentiment-based demand shocks that drive prices from value. For instance, the earliest academic article focusing on this issue uses odd-lot trading to identify demand shocks attributed to "public psychology" relative to the more rational views of "New York Stock Exchange members" (Drew et al. (1950)). The assumption that individual investors are responsible for sentiment-induced mispricing has been explicitly repeated in the nearly 70 years that have followed. 1 In fact, many of the traditional proxies for * Luke DeVault is with Clemson University. Richard Sias is with the Eller College of Management, the University of Arizona. Laura Starks is with the McCombs School of Business, University of Texas at Austin. We thank seminar participants at

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“…Investment restrictions make institutional investors reluctant to deviate too much from the base level when making investment decisions (Cao et al, 2017). Zhang (2013) finds that insurance firms significantly prefer higher liquidity shares when the investment scope restriction is relaxed.…”

Section: The Effect Of Acquired Factors On Institutional Investor Shareholding Stabilitymentioning

confidence: 99%

Influencing Factors of Institutional Investors Shareholding Stability

Han

Niu

2021

SAGE Open

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The premise for institutional investors to participate in firm innovation governance and promote firm innovation’s positive role is that institutional investors have specific decision-making power and are willing to participate in firm innovation governance. Therefore, the influencing factors of institutional investment shareholding stability are an important issue. This study investigates the impact of business connection, risk preference, policy factors, market factors, and firm factors on institutional investors’ shareholding stability using regressional analysis based on the samples of Chinese A-share listed firms from 2014 to 2017. The main findings show that institutional investors with higher business connections, risk preferences, and performance ranking intensity have poor shareholding stability. The reform has significant investment constraints on non-risk preference institutional investors but has insufficient investment constraints on risk preference institutional investors. The substitution and interaction between firm factors and the natural endowment of institutional investors occur alternately. This study’s results provide important policy implications to strengthen related business supervision between institutional investors and shareholding firms. The policy implications include relaxing the investment proportion restriction and establishing a market-oriented performance ranking and institutional investors’ evaluation mechanism.

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Institutional Investment Constraints and Stock Prices

Cited by 34 publications

References 54 publications

ESG Preference, Institutional Trading, and Stock Return Patterns

ESG Preference, Institutional Trading, and Stock Return Patterns

Sentiment Metrics and Investor Demand

Influencing Factors of Institutional Investors Shareholding Stability

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