Examining the Dark Side of Financial Markets: Do Institutions Trade on Information from Investment Bank Connections?

Griffin, John M.; Shu, Tao; Topaloglu, Selim

doi:10.1093/rfs/hhs058

Cited by 93 publications

(59 citation statements)

References 38 publications

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“…I find support for the information hypothesis of Kaniel et al, (2008), that retail investor information seeking behavior as captured by search index has information content that has a permanent price impact. The results are also consistent with Griffin et al, (2010) and Kaniel, Liu, Saar and Titman, (2012) who also find that retail investors can trade for informational reasons. It is natural to ask why the market is not able to discern the effect of the increase in the SVI on the returns.…”

Section: Discussionsupporting

confidence: 90%

“…While Da et al (2011) show that increase in SVI has a positive effect on stock prices for next two weeks, I show how SVI based trading strategy can generate positive alpha while accounting for the common risk factors, at both monthly and weekly level. Finally, utilizing long term risk adjusted returns I provide evidence supporting information hypothesis (Kaniel et al, 2008) and add to the literature showing that the retail investors can benefit by trading on private information (Griffin et al, 2010). This paper is organized as follows: section 2 briefly goes over the existing literature; section 3 introduces the hypothesis, Section 4 describes the data and salient issues related with the data used in the paper; section 5 presents the results and section 6 Discusses the results and Section 7 provides limitations and details avenues for further research.…”

Section: Introductionmentioning

confidence: 56%

“…Efficient market hypothesis assumes that asset prices adjust to new information without any delay and there are no arbitrage opportunities possible. Information hypothesis (Kaniel et al, 2008;Griffin et al, 2010;Kelley & Tetlock, 2013) that is based on efficient market hypothesis states that over time information from investors flows into the asset prices through buying and selling of the stocks. On other hand behavioral finance theory suggests that prices do not adjust instantly and nor are they always rational (Barberis & Thaler, 2003).…”

Section: Theoretical Literaturementioning

confidence: 99%

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Effect of Online Searches on Stock Returns

Ahluwalia

2017

AFR

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I empirically test how online information seeking behavior of investors leads to an impact on asset prices. Various theoretical models assume that information seeking behavior of investors has an impact on asset prices. However, it is very difficult to empirically test this, since the actual information acquisition process of the investors is unobservable. Using a unique data set from Google Trends, I construct a search volume index (SVI) and use it to proxy for the information seeking behavior of retail investors. Using a portfolio based approach I document the asymmetric response of stock returns to the changes in the google search volume index. I find that the portfolio with the highest increase in the SVI has positive and significant alphas while portfolios with decrease in SVI show no significant results. My results are robust to alternative specifications of risk models, time frames and measures of search index. Overall, my results are in line with the hypothesis that retail investors' trades can effect stock prices. The paper's findings add to the debate about information content of the retail trades.

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Section: Discussionsupporting

confidence: 90%

Section: Introductionmentioning

confidence: 56%

Section: Theoretical Literaturementioning

confidence: 99%

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Effect of Online Searches on Stock Returns

Ahluwalia

2017

AFR

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“…5 Our findings along with Campbell, Ramadorai, and Schwartz (2009) suggest that using the broadest possible set of institutional trading data is important to uncover the link between institutional trading and news. As Griffin, Shu, and Topaloglu (2012) discuss, the Ancerno data are less than ten percent of the market. Historically, institutions trade five times more in NYSE than in Nasdaq stocks (Chan and Lakonishok, 1997).…”

Section: Introductionmentioning

confidence: 98%

“…Griffin, Shu, and Topaloglu (2012) use Nasdaq broker identifiers on trades and clearing records to categorize trades likely made by institutions from 1997 to 2002. They examine daily trading by eight types of individual and institutional investors ahead of the most common stock market events associated with information asymmetry: takeover and earnings announcements.…”

Section: Introductionmentioning

confidence: 99%

Are Institutions Informed about News?

Livdan

Schuroff²,

Hendershott

2012

SSRN Journal

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JEL:G11 G12 G14 G24 a b s t r a c t This paper combines daily buy and sell institutional trading volume with all news announcements from Reuters. Using institutional order flow (buy volume minus sell volume) we find a variety of evidence that institutions are informed. Institutional trading volume predicts the occurrence of news announcements. Institutional order flow predicts (i) the sentiment of the news; (ii) the stock market reaction on news announcement days; (iii) the stock market reaction on crisis news days; and (iv) earnings announcement surprises. These results suggest that significant price discovery related to news stories occurs through institutional trading prior to the news announcement date.

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Institutional investors' site visits, market attention, and stock market information efficiency—Evidence from stock price synchronicity

et al. 2022

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As external governance factors, institutional investors' governance mechanisms and governance effect have been focus areas of research. Based on the data of A‐share listed companies in the Shenzhen Stock Exchange from 2013 to 2019, this study discusses the impact of institutional investors' site visits on capital market information efficiency. The study finds that institutional investors' site visits can significantly reduce stock price synchronicity, indicating the potential of site visits to improve capital market information efficiency. Market attention can play an amplifying role in the relationship between institutional investors' site visits and stock price synchronicity, which manifests as their sensitivity enhancement. Further, institutional investors' site visits are more effective for reducing stock price synchronicity in non‐state‐owned enterprises and those in areas with low marketization. Moreover, institutional research increases information asymmetry between investors. This study demonstrates the positive role of institutional research from the perspective of capital market information efficiency and confirms the effectiveness of institutional investors as external governance factors.

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Examining the Dark Side of Financial Markets: Do Institutions Trade on Information from Investment Bank Connections?

Cited by 93 publications

References 38 publications

Effect of Online Searches on Stock Returns

Effect of Online Searches on Stock Returns

Are Institutions Informed about News?

Institutional investors' site visits, market attention, and stock market information efficiency—Evidence from stock price synchronicity

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