Institutional Investors and Stock Market Volatility
Top Cited Papers
- 1 May 2006
- journal article
- Published by Oxford University Press (OUP) in The Quarterly Journal of Economics
- Vol. 121 (2) , 461-504
- https://doi.org/10.1162/qjec.2006.121.2.461
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. Copyright (c) 2006 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology..Keywords
This publication has 72 references indexed in Scilit:
- Large Investors: Implications for Equilibrium Asset, Returns, Shock Absorption, and LiquiditySSRN Electronic Journal, 2005
- Hedge Funds and the Technology BubbleThe Journal of Finance, 2004
- Liquidity and Financial Market RunsThe Quarterly Journal of Economics, 2004
- Large portfolio lossesFinance and Stochastics, 2004
- A theory of power-law distributions in financial market fluctuationsNature, 2003
- Income Inequality in the United States, 1913-1998The Quarterly Journal of Economics, 2003
- The distribution of realized stock return volatilityPublished by Elsevier ,2001
- From the bird's eye to the microscope: A survey of new stylized facts of the intra-daily foreign exchange marketsFinance and Stochastics, 1997
- Institutional trades and intraday stock price behaviorJournal of Financial Economics, 1993
- Aggregate fluctuations from independent sectoral shocks: self-organized criticality in a model of production and inventory dynamicsRicerche Economiche, 1993