Institutional Investors and Stock Market Volatility

Xavier Gabaix, Parameswaran Gopikrishnan, Vasiliki Plerou and H. Eugene Stanley

The Quarterly Journal of Economics, 2006, vol. 121, issue 2, 461-504

Abstract: We present a theory of excess stock market volatility, in which market movements are due to trades by very large institutional investors in relatively illiquid markets. Such trades generate significant spikes in returns and volume, even in the absence of important news about fundamentals. We derive the optimal trading behavior of these investors, which allows us to provide a unified explanation for apparently disconnected empirical regularities in returns, trading volume and investor size.

Date: 2006
References: Add references at CitEc
Citations: View citations in EconPapers (235)

Downloads: (external link)
http://hdl.handle.net/10.1162/qjec.2006.121.2.461 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Institutional Investors and Stock Market Volatility (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:qjecon:v:121:y:2006:i:2:p:461-504.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Quarterly Journal of Economics is currently edited by Robert J. Barro, Lawrence F. Katz, Nathan Nunn, Andrei Shleifer and Stefanie Stantcheva

More articles in The Quarterly Journal of Economics from President and Fellows of Harvard College
Bibliographic data for series maintained by Oxford University Press ().