Quotation Weber, Rüdiger. 2021. Institutional Investors, Households and the Time-Variation in Expected Stock Returns. Journal of Financial and Quantitative Analysis (JFQA).


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Abstract

I document a new stylized fact: the higher the degree of institutional ownership (IO) in a portfolio, the more time-varying expected returns rather than changes in expected cash flows drive changes in its valuation. Empirical evidence suggests that institutions’ time-varying sensitivity to the risk of holding stocks translates into time-varying expected returns on high-IO stocks. In my model, imperfect risk sharing between different types of investors generates cross-sectional differences in return predictability based on ownership, even among a-priori identical stocks. My findings suggest an economic rationale for weak return predictability of small stocks and predictability reversals of stocks and REITs.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Journal of Financial and Quantitative Analysis (JFQA)
Citation Index SSCI
WU Journalrating 2009 A
WU-Journal-Rating new FIN-A, STRAT-A, VW-A, WH-A
Language English
Title Institutional Investors, Households and the Time-Variation in Expected Stock Returns
Year 2021
URL https://jfqa.org/2021/06/16/institutional-investors-households-and-the-time-variation-in-expected-stock-returns/
DOI na
Open Access N
JEL G12, G17, G23, G50

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Weber, Rüdiger (Details)
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Institute for Finance, Banking and Insurance IN (Details)
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