The Interim Trading Skills of Institutional Investors

Puckett, Andy; Yan, Xuemin Sterling

doi:10.1111/j.1540-6261.2010.01643.x

Cited by 383 publications

(164 citation statements)

References 98 publications

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“…Recent work suggests hedge funds (and other institutions) play an important role in short-term returns-both as liquidity providers and incorporating information. For instance, Franzoni and Plazzi (2013) provide evidence that the price impact of hedge fund trades increases when funding liquidity tightens and Puckett and Yan (2011) find evidence that intraquarter institutional trades are informed. (See Aragon and Strahan 2012and Anand et al 2012 for additional evidence of the relation between hedge funds or other institutions and liquidity).…”

Section: The Role Of Hedge Funds In Us Equity Marketsmentioning

confidence: 98%

Hedge Fund Crowds and Mispricing

2016

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R ecent models and the popular press suggest that large groups of hedge funds follow similar strategies resulting in crowded equity positions that destabilize markets. Inconsistent with this assertion, we find that hedge fund equity portfolios are remarkably independent. Moreover, when hedge funds do buy and sell the same stocks, their demand shocks are, on average, positively related to subsequent raw and risk-adjusted returns. Even in periods of extreme market stress, we find no evidence that hedge fund demand shocks are inversely related to subsequent returns. Our results have important implications for the ongoing debate regarding hedge fund regulation.Hedge funds are crowding into more of the same trades these days, amplifying market swings during crises and unnerving investors. Such trading has stoked market jitters in recent months and helped to diminish the impact of corporate fundamentals on stock-market movements.

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Section: The Role Of Hedge Funds In Us Equity Marketsmentioning

confidence: 98%

Hedge Fund Crowds and Mispricing

2016

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“…As noted by Puckett and Yan (2011), there are several methodological issues afflicting such an approach. As noted by Puckett and Yan (2011), there are several methodological issues afflicting such an approach.…”

Section: Research Sample and Methodsmentioning

confidence: 99%

Institutional Investor Trading Around Auditor's Going Concern Modified Opinions: An Analysis of Mutual Funds and Pension Funds

2019

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We contribute to auditing literature by examining trading behavior of mutual and pension funds around first-time going concern modified opinions (GCMO). We find that mutual funds are significant net sellers of GCMO firms in the period before the GCMO announcement and then decrease their net selling at the GCMO announcement. In contrast, pension funds appear to be less active net sellers in the pre-GCMO period and then significantly increase their net selling as an immediate response to the GCMO announcement, and then reduce their net selling in the post-GCMO period. Our net selling results are robust to a battery of additional tests, including alternative specifications of the GCMO event window, using an extended pre-GCMO benchmark period, controlling for 8-K and earnings announcements, excluding subsequently bankrupt firms and using change variables in our models. In additional analyses, we find that overall trading volume increases for both mutual and pension funds at the GCMO announcement. Our examination of trading behavior provides initial evidence on differences between these two groups of institutional investors in their trading response to first-time GCMOs, and enables us to provide a more robust assessment of the information content of GCMOs for these different groups of sophisticated market participants.

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“…For example, Cremers and Petajisto (2009) construct a new measure of active portfolio management and find that funds with a high value in the measure outperform benchmarks and exhibit strong performance persistence. Puckett and Yan (2011) find that institutional investors earn significant abnormal returns on their trades within the trading quarter and that interim trading performance is persistent. Kacperczyk, Van Nieuwerburgh, and Veldkamp (2014) decompose the fund performance into the skill of stock picking and of market timing, and find that the skilled fund managers can both pick stocks well during booms and time the market well in recessions.…”

Section: Firm Performancementioning

confidence: 97%