Institutional investor’ proportions and inactive trading

Jiarui Wang, Shancun Liu and Haijun Yang

International Review of Financial Analysis, 2022, vol. 82, issue C

Abstract: We focus on a typical market anomaly-inactive trading: trading volume shrinks while stock price abnormally jumps. We calibrate a theoretical model with variance ambiguity heterogeneous among investors and illustrate that ambiguity averse investors' proportions enhance trading volume shrinkage and abnormal price jumps. We provide a cross-section analysis of stocks' inactive trading by introducing institutional investors' proportions to measure investor structures' differences among stocks. We also empirically measure relative inactive trading for constituent stocks in S&P 500 from 2014 to 2019 and demonstrate that institutional investors' proportion is negatively related to inactive trading. Finally, we demonstrate that higher proportions of institutional investors lead to less inactive trading anomalies.

Keywords: Inactive trading measurement; Institutional investors' proportion; Ambiguity heterogeneous (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:82:y:2022:i:c:s1057521922001685

DOI: 10.1016/j.irfa.2022.102207

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