Caught on tape: Institutional trading, stock returns, and earnings announcements

By John Y. Campbell, Tarun Ramadorai, A. Schwartz. 2009

413 citations recorded by the source corpus.

Many questions about institutional trading can only be answered if one tracks high-frequency changes in institutional ownership. In the United States, however, institutions are only required to report their ownership quarterly in 13-F filings. We infer daily institutional trading behavior from the "tape", the Transactions and Quotes database of the New York Stock Exchange, using a sophisticated method that best predicts quarterly 13-F data from trades of different sizes. We find that daily institutional trades are highly persistent and respond positively to recent daily returns but negatively to longer-term past daily returns. Institutional trades, particularly sells, appear to generate short-term losses--possibly reflecting institutional demand for liquidity--but longer-term profits. One source of these profits is that institutions anticipate both earnings surprises and post-earnings announcement drift. These results are different from those obtained using a standard size cutoff rule for institutional trades.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/c08c66051384e1178dc7ca423cb18ffaf8a83667

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Citations in the corpus

Tracking Retail Investor Activity (2020, background): “More recently, Campbell, Ramadorai, and Schwartz (2009) effectively allow these cutoff points to vary through a regression approach that is calibrated to observed quarterly changes in institutional ownership, but they maintain the same basic assumption that small trades are more likely to arise…”
Who Drove and Burst the Tech Bubble (2011, methodology): “C), we compare the mapping between our NASDAQ data and 13f data to that of Campbell et al. (2009).”
Financial Reporting Opacity and Informed Trading by International Institutional Investors (2012, background): “In support of this argument, Campbell et al. (2009) find that institutions trade in very small lot sizes.”
Individual investors and financial disclosure (2013, background): “more frequently misclassified, and Campbell et al. (2009) provide evidence suggesting that simple size cutoffs used in previous studies are inaccurate and can lead to incorrect inferences.”
Institutional Portfolio Flows and International Investments (2008, methodology): “We also computed measures of institutional and individual investor flow using the method of Campbell, Ramadorai, and Schwartz (2007) .”
Are Institutions Informed About News (2015, background): “One explanation is that broader, more comprehensive measures of institutional data are needed (as also in Campbell, Ramadorai, and Schwartz, 2009). the exception of news on economic indicators.”