Abstract
There is no consensus on whether or not institutional investors stabilize market and improve market efficiency. This paper investigates the effect of institutional investors of different categories on volatility and informational efficiency, and unbalanced panel 2SLS regression used in this paper provides new evidence. Except for insurance company, all types of institutional trading help stock price incorporate firm-specific information, which makes stock price track fundamentals closely, increases informational efficiency and decreases volatility. Price informativeness checks further confirm institutions as a whole and fund enable stock price to compound more current and future earnings information. Institutional investors indeed stabilize stock market and improve market efficiency, however, trading of insurance company does not decrease volatility or increase informational efficiency.
| Original language | English |
|---|---|
| Pages (from-to) | 606-616 |
| Number of pages | 11 |
| Journal | Xitong Gongcheng Lilun yu Shijian/System Engineering Theory and Practice |
| Volume | 31 |
| Issue number | 4 |
| State | Published - Apr 2011 |
Keywords
- Idiosyncratic volatility
- Institutional trading
- PIN
- Volatility
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