Heterogeneous institutional preferences and informativeness: Evidence from China

Wenbin Liao, Jianing Du and Ping-Wen Sun

Pacific-Basin Finance Journal, 2020, vol. 60, issue C

Abstract: Using complete semi-annual stock holdings of seven different types of institutional investors including public mutual funds, insurance companies, social security funds, qualified foreign institutional investors (QFIIs), asset management portfolio of securities companies, proprietary trading portfolio of securities companies, and trust funds, we investigate those heterogeneous institutional investors' preferences and informativeness in the China's A-shares market from 2005 to 2017. We find that although those institutional investors in aggregate prefer to hold stocks with a lower market risk, a larger size, a higher share price, a lower turnover ratio, a higher return on equity ratio, a higher leverage ratio, a higher floating percentage, better past year performance, and lower controlling shareholder's ownership, insurance companies tend to hold past loser stocks. In addition, our results indicate that only qualified foreign institutional investors are informed among those seven types of institutional investors. While our findings show that holding changes of public mutual funds and social security funds exhibit short-term return predictability, there is a price reversal effect for their holdings after one year. Furthermore, qualified foreign institutional investors exhibit a better trading skill while insurance companies demonstrate a worse trading skill. Finally, our results show that institutional investors are generally market stabilizers in the China's A-shares market.

Keywords: Institutional ownership; Institutional preferences; Institutional informativeness; Holding change; China (search for similar items in EconPapers)
JEL-codes: G12 G14 G20 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:60:y:2020:i:c:s0927538x18305481

DOI: 10.1016/j.pacfin.2020.101295

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