Individuals and Institutional Investors’ Trading and Stock Abnormal Returns

45 Pages Posted: 24 Aug 2009

See all articles by Tong Zhu

Tong Zhu

Peking University- Guanghua School of Management

Yujin Cao

Peking University - Guanghua School of Management

Date Written: August 24, 2009

Abstract

This paper analyzed the investors’ trading in Chinese financial market from a behavioral perspective, which demonstrated how investors’ trading strategies affect abnormal returns of securities. In the analysis, we classified total trading into individual investors’ trading and institutional investors’ trading. By constructing the trading intensities measures, we justified individual investors are contrarian when buying or selling securities and institutional investors may engage in positive feedback trading strategies. The predictive powers of the trading strategies were also justified in the paper, and the information contained in trading measures may be more than those in abnormal returns and volumes. Furthermore, we also analyzed the interactions between individual investors and institutional investors and their effects on securities’ returns and emphasized the importance of institutional investors in this process. Another point analyzed in this paper is about the responses of individuals and institutional investors to the announcement of analysts’ recommendations. We found that institutional investors may use the information about the changes of analysts’ recommendations when compared to the behaviors of individual investors.

Keywords: individuals and institutional investors’ trading, analysts’ recommendation, TOPVIEW data

JEL Classification: G20

Suggested Citation

Zhu, Tong and Cao, Yujin, Individuals and Institutional Investors’ Trading and Stock Abnormal Returns (August 24, 2009). 22nd Australasian Finance and Banking Conference 2009, Available at SSRN: https://ssrn.com/abstract=1460747 or http://dx.doi.org/10.2139/ssrn.1460747

Tong Zhu (Contact Author)

Peking University- Guanghua School of Management ( email )

Beijing
China

Yujin Cao

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

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