This paper shows that during episodes of market turmoil, 13F institutional investors with short trading horizons sell their stockholdings to a larger extent than 13F institutional investors with longer trading horizons. This creates price pressure for stocks held mostly by short-horizon investors, which, as a consequence, experience larger price drops, and subsequent reversals, than stocks held mostly by long-horizon investors. These findings, obtained after controlling for the withdrawals experienced by the investors, are not driven by other institutional investors' and firms' characteristics. Overall, the evidence indicates that investors with short horizons amplify the effects of market-wide negative shocks by demanding liquidity at times when other potential buyers'capital is scarce.
Investors' Horizons and the Amplification of Market Shocks / Cristina, Cella; Ellul, Andrew; Mariassunta, Giannetti. - In: THE REVIEW OF FINANCIAL STUDIES. - ISSN 0893-9454. - 26:7(2013), pp. 1607-1648. [10.1093/rfs/hht023]
Investors' Horizons and the Amplification of Market Shocks
ELLUL, Andrew;
2013
Abstract
This paper shows that during episodes of market turmoil, 13F institutional investors with short trading horizons sell their stockholdings to a larger extent than 13F institutional investors with longer trading horizons. This creates price pressure for stocks held mostly by short-horizon investors, which, as a consequence, experience larger price drops, and subsequent reversals, than stocks held mostly by long-horizon investors. These findings, obtained after controlling for the withdrawals experienced by the investors, are not driven by other institutional investors' and firms' characteristics. Overall, the evidence indicates that investors with short horizons amplify the effects of market-wide negative shocks by demanding liquidity at times when other potential buyers'capital is scarce.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.