 Catastrophic risk and institutional investors: Evidence from institutional trading around 9/11Yangyang Chen, Gang Hu, Danlei Bonnie Yu and Jingran Zhao Pacific-Basin Finance Journal, 2019, vol. 56, issue C, 211-233 Abstract: Using a large sample of transaction-level institutional trading data, we investigate the role of institutional investors in stock market around the terrorist attacks on September 11, 2001 (9/11), a sudden exogenous catastrophic shock to financial markets. We find that institutional investors remain net buyers amid the large market-wide crisis following 9/11. Furthermore, stocks that are highly bought by institutions earn higher abnormal future returns than stocks that are highly sold. We also examine trading patterns across different types of institutional investors and various industry sectors. Our results suggest that institutional investors act as liquidity providers rather than engage in panic selling during market crises caused by catastrophic events. We also find that their liquidity provision trading is rational and profitable. Overall, our findings support the market stabilization role played by institutional investors who lend a “steady hand” during high-stress periods in financial markets. Keywords: Catastrophic risk; Market crisis and stability; Institutional investor; Trading (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:pacfin:v:56:y:2019:i:c:p:211-233 DOI: 10.1016/j.pacfin.2019.06.004 Access Statistics for this article Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee More articles in Pacific-Basin Finance Journal from Elsevier |
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