Working Paper: NBER ID: w11439
Authors: John Y. Campbell; Tarun Ramadorai; Tuomo O. Vuolteenaho
Abstract: Many questions about institutional trading can only be answered if one can track high-frequency changes in institutional ownership. In the US, however, institutions are only required to report their ownership quarterly in 13-F filings. We infer daily institutional trading behavior from the "tape", the Transactions and Quotes database of the New York Stock Exchange, using both a naive approach and a sophisticated method that best matches quarterly 13-F data. Increases in our measures of institutional flows negatively predict returns, particularly when institutions are selling. We interpret this as evidence that 13-F institutions compensate more patient investors for the service of providing liquidity. We also find that both very large and very small trades signal institutional activity, while medium size trades signal activity by the rest of the market.
Keywords: Institutional Trading; Stock Returns; Order Flow
JEL Codes: G1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Institutional flows (G23) | Stock returns (G12) |
| Institutional selling (G23) | Stock returns (G12) |
| Very large trades (F19) | Institutional activity (D02) |
| Very small trades (F19) | Institutional activity (D02) |
| Medium-sized trades (F19) | Individual investor activity (G24) |
| Institutional sales (G23) | Subsequent returns (Y20) |