How Informed are the Smart Guys? Evidence from Short-Term Institutional Trading prior to Major Events
We examine the information content of trading by examining institutional investors ability to trade in the correct direction in the days immediately preceding large value-relevant events. Prior to takeovers, institutional investors are actually small (insignificant) net sellers and there is no evidence that their trading can predict takeover premiums. Institutional trading in the five and ten days prior to earnings announcements is uninformative of earnings announcement returns. For large positive and negative price moves other than takeovers and earnings announcements, we find institutional selling ahead of large up-moves, and institutional buying ahead of large negative returns. We further examine short-term institutional net buying unconditionally and find that it is uninformative of future one- and two-week stock returns. In contrast, we find that institutional trading on and after earnings announcements is profitable. Overall, our findings suggest that aggregate institutional profits may primarily stem from their ability to process publicly available information rather than their ability to extract private information.
John M. Griffin Tao Shu Selim Topaloglu
University of Texas at Austin University of Georgia Queens University
国际会议
大连
英文
1-56
2008-07-02（万方平台首次上网日期，不代表论文的发表时间）