The Dynamics of Institutional and Individual Trading

By John M. Griffin, Jeffrey H. Harris, Selim Topaloglu. 2003

544 citations recorded by the source corpus.

We study the daily and intradaily cross-sectional relation between stock returns and the trading of institutional and individual investors in Nasdaq 100 securities. Based on the previous day's stock return, the top performing decile of securities is 23.9% more likely to be bought in net by institutions (and sold by individuals) than those in the bottom performance decile. Strong contemporaneous daily patterns can largely be explained by net institutional (individual) trading positively (negatively) following past intradaily excess stock returns (or the news associated therein). In comparison, evidence of return predictability and price pressure are economically small. Copyright 2003 by the American Finance Association.

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/698e9148114d71342cd130cfede2fec50adc2320

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Accounting

In Economics and Econometrics

In Finance

Citations in the corpus

Correlated Trading and Returns (2008, background): “…similar to prior and contemporaneous papers studying individual investor behavior (see Grinblatt and Keloharju (2000), Nofsinger and Sias (1999), Griffin, Harris, and Topaloglu (2003), Barber, Odean, and Zhu (2003), Kaniel, Saar, and Titman (2004), Goetzmann and Massa (2002), and Jackson (2003)…”
Institutional Investors, Past Performance, and Dynamic Loss Aversion (2009, background): “Prior studies have found that institutions engage in momentum trading and buy into well-performing stocks (Griffin, Harris, and Topaloglu (2003), Badrinath and Wahal (2002)).”
Currency Returns, Intrinsic Value, and Institutional-Investor Flows (2005, background): “See Cheung and Chinn (2001) for survey evidence from practitioners on order flow information.”
How Wise Are Crowds? Insights from Retail Orders and Stock Returns (2013, unknown): “12 Databases of retail trades approaching this size are studied in Griffin, Harris, and Topaloglu (2003) (165 million trades), KST ($1.55 trillion traded), and BOZ ($128 billion traded).”
Differences in herding: Individual vs. institutional investors (2017, unknown): “The behavioral finance literature suggests that return-volume relations should be stronger in the trading of individual investors than in the trading of institutional investors (Griffin et al., 2003).”
Firm specific and macro herding by professional and amateur investors and their effects on market volatility (2011, background): “Grinblatt et al. (1995) find weak evidence of herding in the mutual funds they analyzed. However, they find that when herding exists, its impact is important: stocks purchased by funds that herd outperform by four percent stocks sold over the subsequent six months. This return difference is especial”
Institutional Investors and Equity Returns: Are Short-Term Institutions Better Informed? (2009, background): “Grinblatt and Titman (1989) find a positive relation between turnover and pre-expense portfolio performance, while Carhart (1997) finds that fund turnover is negatively related to net fund returns.”
Asset Prices and Institutional Investors (2013, unknown): “The institutional investors have an additional incentive to post a higher return 1See, for example, Griffin, Harris, and Topaloglu (2003).”
Caught on tape: Institutional trading, stock returns, and earnings announcements (2009, background): “Griffin, Harris, and Topaloglu (2003) study the trades of Nasdaq brokerage houses that specialize in dealing with either individual or institutional investors, and they find that institutions buy stocks that have recently risen, both at the daily frequency and the intra-daily frequency.”
Paying Attention: Overnight Returns and the Hidden Cost of Buying at the Open (2012, methodology): “For this abridged sample, we follow the procedures in Griffin et al. (2003) and classify both sides of all trades as originating from an individual or an institution based on the market participants involved in the trade.”