The impacts of institutional ownership on stock returns

  • Hongwei ChuangEmail author


The relation between institutional investors’ trading persistence and stock returns is still not clear. Despite the fact that previous studies have demonstrated the persistence of institutional trading can be short-term positively correlated with following stock returns, some empirical studies show that this short-term positive relation holds only under particular circumstances. Recently, Dasgupta et al. (J Finance 66:635–653, 2011) have even found that the persistence of institutional trading is associated with reversals in stock returns. To fill the gap in the literature, I use a unique monthly institutional ownership data to present new empirical evidence showing that institutional trading not only has a short-term positive impact on stock returns but can also have a long-term negative effect. Moreover, I find that stocks with the lower accumulated growth of institutional ownership tend to have greater momentum than stocks with higher such growth. A zero-investment strategy of buying stocks with ‘LOW’-decile institutional ownership and selling ‘HIGH’-decile ones can outperform the market and generate significant abnormal returns.


Institutional investors Herding Momentum effect 

JEL Classification

G11 G12 G14 



We thank the seminar participants at National Chung Hsing University, Tohoku University, 2015 Taiwan Economics Research Summer Meeting, and 2016 Asian Meeting of the Econometric Society for their suggestions. Notably, we are grateful to the Editor, Bertrand Candelon, and an anonymous referee for their valuable comments.

Compliance with ethical standards


This study was funded by 2016 Nomura Foundation (AE-06) and JSPS KAKENHI 17K13759 JP.

Conflicts of interest

Chuang declares that he has no conflict of interest.

Human Participants

This article does not contain any studies with human participants or animals performed by any of the authors.


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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Graduate Schools of Economics and ManagementTohoku UniversitySendaiJapan

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