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Institutional investors and stock returns volatility: Empirical evidence from a natural experiment

Martin T. Bohl, Janusz Brzeszczynski and Bernd Wilfling

Journal of Financial Stability, 2009, vol. 5, issue 2, 170-182

Abstract: In this paper, we provide empirical evidence on the impact of institutional investors on stock market returns dynamics. The Polish pension system reform in 1999 and the associated increase in institutional ownership due to the investment activities of pension funds are used as a unique institutional characteristic. Performing a Markov-switching-GARCH analysis we find empirical evidence that the increase of institutional ownership has temporarily changed the volatility structure of aggregate stock returns. The results are interpretable in favor of a stabilizing effect on index stock returns induced by institutional investors.

Keywords: Institutional; traders; Polish; stock; market; Pension; fund; investors; Stock; market; volatility; Markov-switching-GARCH; model (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (30)

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