Does Positive-Feedback Trading by Institutions Contribute to Stock Return Momentum? PDF Download

Author: Tao Shu
Publisher:
ISBN:
Category :
Languages : en
Pages : 46

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Book Description
This paper investigates the impact of positive-feedback trading by institutions on stock return momentum and market efficiency. Using an ex-ante measure of positive-feedback trading by institutions, I find that return momentum is stronger in stocks that attract more positive-feedback trading by institutions, suggesting that positive-feedback trading by institutions intensifies stock return momentum. This effect is not only statistically and economically significant, but also robust after controlling for the other factors that influence return momentum. Further empirical findings suggest that positive-feedback trading by institutions destabilizes stock prices and hampers market efficiency.

Author: John R. Nofsinger
Publisher:
ISBN:
Category : Institutional investments
Languages : en
Pages : 308

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Author: Cameron Peng
Publisher:
ISBN:
Category :
Languages : en
Pages : 48

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We show that mutual funds contribute to cross-sectional momentum and excess volatility through positive feedback trading. Stocks held by positive feedback funds exhibit much stronger momentum, almost doubling the returns from a simple momentum strategy. This “enhanced” momentum is robust to alternative measures of positive feedback trading and cannot be explained by other stock characteristics, ex-post firm fundamentals, fund flows, or herding. Moreover, enhanced momentum is almost fully reversed after one quarter, suggesting initial overshooting and subsequent reversal. We argue the most likely explanation is the price pressure from positive feedback trading. Finally, we relate positive feedback trading to mutual fund performance and show that it can positively predict a fund's return from active management.

Author: Tao Shu
Publisher:
ISBN:
Category : Institutional investments
Languages : en
Pages : 220

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My dissertation finds that the effects of institutional trading on stock price efficiency are significant and complicated. On one hand, I present evidence that institutional trading in general improves price efficiency. In particular, major stock market anomalies such as stock return momentum, post earnings announcement drift, and the book-to-market effect are much stronger in stocks with lower institutional trading volume. On the other, some institutional trading behaviors could hamper stock price efficiency even though institutions are generally rational arbitrageurs. Specifically, I show that when institutions act as positive-feedback traders, their trading contributes to stock return momentum and hampers prices efficiency.

Author: Itzhak Ben-David
Publisher:
ISBN:
Category :
Languages : en
Pages :

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We present evidence that equity momentum strategies are partially driven by positive-feedback trading intermediated via the mutual fund sector. We identify a U.S.-specific structural break to this channel that substantially weakened the relationship between fund flows and past style returns. As a result, trading strategies that load on flow-driven positive-feedback trading (including momentum in stocks, styles, and factors) experienced a profitability decline. Consistent with the proposed channel, the profitability decline was limited to the U.S. market. Moreover, factors that were more directly exposed to the structural break experienced a sharp return "kink" in the months after the event.

Author: Narjess Boubakri
Publisher: Emerald Group Publishing
ISBN: 1780522428
Category : Business & Economics
Languages : en
Pages : 402

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Book Description
Examines various issues concerning the strategies of institutional investors, the role of institutional investors in corporate governance, their impact on local and international capital markets, as well as the emergence of sovereign and other asset management funds and their interactions with micro and macro economic and market environments.

Author: Sushil Bikhchandani
Publisher:
ISBN:
Category : Capital market
Languages : en
Pages : 38

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Author: Richard W. Sias
Publisher:
ISBN:
Category :
Languages : en
Pages :

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This study examines serial correlation in daily portfolio returns for securities held primarily by individual investors versus securities held primarily by institutional investors. The results implicate institutional investors as the primary source of positive serial correlation in portfolio returns. Both own- and cross-autocorrelations are higher for the securities in which institutional investors play a greater role. The results are not consistent with pricing error corrections by market makers, non-synchronous trading or transaction costs as the major cause of the observed positive autocorrelations in daily portfolio returns. The results are most consistent with the autocorrelations being caused by the correlated trading patterns of institutional investors due to such activities as herding, momentum investing or other positive-feedback trading strategies.

Author: Bruce Vanstone
Publisher: Harriman House Limited
ISBN: 0857191357
Category : Business & Economics
Languages : en
Pages : 181

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Book Description
In Designing Stock Market Trading Systems Bruce Vanstone and Tobias Hahn guide you through their tried and tested methodology for building rule-based stock market trading systems using both fundamental and technical data. This book shows the steps required to design and test a trading system until a trading edge is found, how to use artificial neural networks and soft computing to discover an edge and exploit it fully. Learn how to build trading systems with greater insight and dependability than ever before Most trading systems today fail to incorporate data from existing research into their operation. This is where Vanstone and Hahn's methodology is unique. Designed to integrate the best of past research on the workings of financial markets into the building of new trading systems, this synthesis helps produce stock market trading systems with unrivalled depth and accuracy. This book therefore includes a detailed review of key academic research, showing how to test existing research, how to take advantage of it by developing it into a rule-based trading system, and how to improve it with artificial intelligence techniques. The ideas and methods described in this book have been tried and tested in the heat of the market. They have been used by hedge funds to build their trading systems. Now you can use them too.

Author: Gary Antonacci
Publisher: McGraw Hill Professional
ISBN: 0071849459
Category : Business & Economics
Languages : en
Pages : 256

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Book Description
The investing strategy that famously generates higher returns with substantially reduced risk--presented by the investor who invented it "A treasure of well researched momentum-driven investing processes." Gregory L. Morris, Chief Technical Analyst and Chairman, Investment Committee of Stadion Money Management, LLC, and author of Investing with the Trend Dual Momentum Investing details the author’s own momentum investing method that combines U.S. stock, world stock, and aggregate bond indices--a formula proven to dramatically increase profits while lowering risk. Antonacci reveals how momentum investors could have achieved long-run returns nearly twice as high as the stock market over the past 40 years, while avoiding or minimizing bear market losses--and he provides the information and insight investors need to achieve such success going forward. His methodology is designed to pick up on major changes in relative strength and market trend. Gary Antonacci has over 30 years experience as an investment professional focusing on under exploited investment opportunities. In 1990, he founded Portfolio Management Consultants, which advises private and institutional investors on asset allocation, portfolio optimization, and advanced momentum strategies. He writes and runs the popular blog and website optimalmomentum.com. Antonacci earned his MBA at Harvard.