Investor Heterogeneity and Trading

Download or read book Investor Heterogeneity and Trading written by Anzhela Knyazeva and published by . This book was released on 2018 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the impact of investor heterogeneity on trading. Institutional investors play a crucial role in the information environment of firms. We argue that heterogeneity in the information ability of institutional investors has a significant impact on trading around information releases. We propose novel measures of within-firm investor heterogeneity and find that investor heterogeneity increases abnormal trading volume around news, holding constant the average levels of investor sophistication. We also find larger spread reductions around announcements for firms with greater investor heterogeneity. The effect of investor heterogeneity on trading around news continues to hold after accounting for total institutional ownership, the presence certain types of institutional investors, and analyst coverage.