Institutional trading and asset pricing

Bart Frijns, Thanh D. Huynh, Alireza Tourani-Rad, P. Joakim Westerholm

Research output: Contribution to journalArticleResearchpeer-review

7 Citations (Scopus)

Abstract

This paper examines whether the trading activity of different investor types, institutional versus retail, can affect the relation between beta and average returns. We find that the beta-return relation is strong and positive on days with high institutional trading activity, and negative and significant on low institutional trading days. Our findings are robust and not driven by recently documented effects such as macroeconomic news and leverage constraints, among others. The evidence is consistent with the hypothesis that the preferences and characteristics of various investor types, which are revealed through their trading activity, cause the slope of the Security Market Line to change.

Original languageEnglish
Pages (from-to)59-77
Number of pages19
JournalJournal of Banking and Finance
Volume89
DOIs
Publication statusPublished - 1 Apr 2018

Keywords

  • CAPM
  • Institutional trading
  • Intermediary asset pricing
  • Investor preferences

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