 Short-term institutions’ information advantage and overvaluationBrian Du, Alejandro Serrano and Andre Vianna The North American Journal of Economics and Finance, 2021, vol. 55, issue C Abstract: Prior literature has documented that institutions which trade more frequently are better able to forecast future returns and have an informational advantage. This study examines a proximate explanation for the differences in performance based on institutions’ investment horizon – short-term institutions are better informed because they are better able to identify overvalued stocks that are short-sale constrained and overvalued in the context of Miller’s (1977) overvaluation hypothesis. Analysis is conducted on 6330 unique firms from 1996 to 2014 using the calendar-time portfolio approach where abnormal returns are estimated from the Fama-French-Carhart four-factor regression model. The results provide evidence that stocks which are extremely overvalued due to short-sale constraints have the greatest decline in short-term institutional ownership, consistent with the notion that short-term institutions are able to correctly assess the components for stock overvaluation. Keywords: Short interest; Institutional ownership; Short-sale constraints (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:55:y:2021:i:c:s1062940820301893 DOI: 10.1016/j.najef.2020.101299 Access Statistics for this article The North American Journal of Economics and Finance is currently edited by Hamid Beladi More articles in The North American Journal of Economics and Finance from Elsevier |
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