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Reconcilable Differences: Momentum Trading by Institutions
Author(s) -
Sias Richard W.
Publication year - 2007
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.2007.00159.x
Subject(s) - lag , weighting , econometrics , economics , momentum (technical analysis) , capitalization , value (mathematics) , institutional investor , financial economics , statistics , corporate governance , mathematics , finance , medicine , computer network , linguistics , philosophy , computer science , radiology
A growing literature evaluates the relation between lag returns and demand by institutional investors. Given that lag returns and institutional ownership are directly observable, it is surprising that previous tests yield dramatically different conclusions. This study examines differences across studies and finds that four factors account for these discrepancies: (1) value‐weighting versus equal‐weighting across stocks, (2) averaging versus aggregating over managers, (3) disagreement in the signs of measures of institutional demand, and (4) correlation between current capitalization and both lag returns and measures of institutional demand. Controlling for these factors, the results across different methods are remarkably uniform.