Institutional Ownership and Return Reversals Following Short-Term Return Consistency

Abstract

Securities with consistently strong positive (negative) returns during the previous two weeks have future returns that are higher (lower) than those that do not. The results hold for various robustness checks, including those involving firm size, share turnover, past return levels, and bid-ask bounce. The returns to short horizon consistency trading strategies are reliable through time and are both economically and statistically significant. There is also some evidence that longer periods of consistency lead to greater risk-adjusted profits. Most surprising is that this effect holds only for those firms with high institutional ownership.

Keywords: Consistency, asset pricing, institutional investing, market efficiency

JEL Classification: G11, G12, G14