The Performance of Short-Term Institutional Trades

Bidisha Chakrabarty, Pamela C. Moulton and Charles Trzcinka

Journal of Financial and Quantitative Analysis, 2017, vol. 52, issue 4, 1403-1428

Abstract: Using a database of daily institutional trades, we document that a majority of short-term institutional trades lose money. In aggregate, over 23% of round-trip trades are held for less than 3 months, and the returns on these trades average -3.91% (nonannualized). These losses are pervasive across all types of stocks, with the lowest returns occurring in small stocks, value stocks, and low-momentum stocks. Short-term trades lose more in more volatile markets. Across funds, the worst short-term returns accrue to funds that do the most trading, and there is no evidence of persistent skill or disposition effect in short-term institutional trades.

Date: 2017
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