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We document the effects of institutional investors on the qualitative information disclosure of firms during earnings conference calls. Using conference call and institutional ownership data between 2005 and 2016, we find that aggregate institutional ownership dampens conference call tone. The effects of institutional investors on tone are causal based on results from indexed firms. Consistent with hypotheses regarding investors' horizons, short‐term institutional investors are associated with a more positive conference call tone, as well as more opportunistic trading, whereas long‐term investors are associated with a more negative tone. Market participants can generally disentangle the impact of institutional investors on tone based on investor type.

Purpose This study creates a measure of investor sentiment directly from retail trader activity to identify misvaluation and to examine the link between sentiment and subsequent returns. Design/methodology/approach Using investor reports from a large discount brokerage that include measures of activity such as net buying, net new accounts and net new assets, this study creates a measure of retail trader sentiment using principal components. This study examines the relation between sentiment and returns through conditional mean and regression analyses. Findings Retail sentiment activity coincides with aggregate Google Trends search data and firms with the greatest sensitivity to retail sentiment tend to be small, young and volatile. Periods of high retail sentiment precede poor subsequent market returns. Cross-sectional results detail the strongest impact on subsequent returns within difficult to value or difficult to arbitrage firms. Originality/value This study links a rich measure of retail trader activity to subsequent market and cross-sectional returns. These results deepen our understanding of noise trader risk and aggregate investor sentiment.