Do Institutional Investors Destabilize Stock Prices? Evidence on Herding and Feedback Trading / Josef Lakonishok, Andrei Shleifer, Robert W. Vishny.

Format:

Book

Author/Creator:

Lakonishok, Josef.

Contributor:

National Bureau of Economic Research.

Shleifer, Andrei.

Vishny, Robert W.

Series:

Working Paper Series (National Bureau of Economic Research) no. w3846.

NBER working paper series no. w3846

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1991.

Summary:

This paper uses a new data set of quarterly portfolio holdings of 769 all-equity pension funds between 1985 and 1989 to evaluate the potential effect of their trading on stock prices. We address two aspects of trading by money managers: herding, which refers to buying (selling) the same stocks as other managers buy (sell) at the same time; and positive-feedback trading, which refers to buying winners and selling losers. These two aspects of trading are commonly a part of the argument that institutions destabilize stock prices. At the level of individual stocks at quarterly frequencies, we find no evidence of substantial herding or positive-feedback trading by pension fund managers, except in small stocks. Also, there is no strong cross-sectional correlation between changes in pension funds' holdings of a stock and its abnormal return.

Notes:

Print version record

September 1991.