Trading concentration and industry-specific information: an analysis of auto complaints

Marshall A. Geiger (), Sami Keskek () and Abdullah Kumas ()
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Marshall A. Geiger: University of Richmond
Sami Keskek: Florida State University
Abdullah Kumas: University of Richmond

Review of Quantitative Finance and Accounting, 2022, vol. 59, issue 3, No 3, 913-937

Abstract: Abstract We investigate whether sophisticated investors’ trading concentration in the auto industry is associated with their use of auto complaint data. We find that the extent to which mutual funds concentrate their trading in the auto industry is positively associated with their incorporation of the complaint information into their trading decisions both before and after auto recall announcements. We provide evidence that trading concentration by mutual funds is more consistent with the information advantage explanation rather than behavioral explanations for concentration such as overconfidence or familiarity. However, we find that pension funds, regardless of their level of trading concentration, do not use the customer complaint information to inform their trading decisions. Our findings suggest that pension funds concentrate trading for reasons other than short-term information advantage, suggesting that the underlying reason for trading concentration can differ by the type of institutional investor.

Keywords: Industry trading concentration; Institutional investors; Customer complaints; Product recall; Auto industry; Market efficiency (search for similar items in EconPapers)
JEL-codes: G14 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s11156-022-01063-x

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