Institutions and the book-to-market effect: The role of investment horizon

Muhammad Sabeeh Iqbal, Aslihan Salih and Levent Akdeniz

International Review of Economics & Finance, 2023, vol. 84, issue C, 140-153

Abstract: In this study, we investigate the differential contribution of institutions with different investment horizons in the book-to-market effect. We find that long-horizon institutions tend to buy (sell) stocks with positive (negative) past intangible information. This behavior exacerbates market overreaction and magnifies intangible return reversals, thus contributing to the book-to-market effect. On the other hand, short-horizon institutions trade independent of intangible information, and their trading in the direction of intangible information does not contribute to the book-to-market effect. Moreover, our findings also support that short-horizon institutions are better informed than long-horizon institutions.

Keywords: Institutions; Investment horizon; Book-to-market; Market overreaction (search for similar items in EconPapers)
JEL-codes: G1 G2 M1 M2 N2 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:84:y:2023:i:c:p:140-153

DOI: 10.1016/j.iref.2022.10.017

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