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Institutional Investors, Households, and the Time-Variation in Expected Stock Returns.
- Source :
- Journal of Financial & Quantitative Analysis; Feb2023, Vol. 58 Issue 1, p352-391, 40p
- Publication Year :
- 2023
-
Abstract
- I document a new stylized fact: The higher the degree of institutional ownership (IO) in a portfolio, the more time-varying expected returns rather than changes in expected cash flows drive changes in its valuation. Empirical evidence suggests that institutions' time-varying sensitivity to the risk of holding stocks translates into time-varying expected returns on high-IO stocks. In my model, imperfect risk sharing between different types of investors generates cross-sectional differences in return predictability based on ownership, even among a priori identical stocks. My findings suggest an economic rationale for weak return predictability of small stocks and predictability reversals of stocks and real estate investment trusts. [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 00221090
- Volume :
- 58
- Issue :
- 1
- Database :
- Complementary Index
- Journal :
- Journal of Financial & Quantitative Analysis
- Publication Type :
- Academic Journal
- Accession number :
- 162012792
- Full Text :
- https://doi.org/10.1017/S0022109021000727