Recursive equilibrium with Price Perfect Foresight and a minimal state space

Using the data of stock returns and the variations of quarterly institutional ownership around Secondary Equity Offerings (SEOs) in China from 2004 to 2008, we verify that institutional investors are smart in selecting stocks. Sorting the SEOs samples into two groups according to whether there is an increase or decrease in institutional ownership, we find no significant difference in stock returns between the two groups before SEOs, but higher returns among the group with increases in institutional ownership over 1 month, 3 month, 6 month, 9 month, 12 month and 18 month periods, respectively. This result indicates the evidence of the stronger stock selection ability of institutional investors.

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Recursive equilibrium with Price Perfect Foresight and a minimal state space

Cited by 2 publications

References 38 publications

Lipschitz recursive equilibrium with a minimal state space and heterogeneous agents

Lipschitz recursive equilibrium with a minimal state space and heterogeneous agents

A study on institutional investors selecting better stocks: Evidence from SEOs in China

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