Do institutional investors destabilize stock prices? evidence from an emerging market

Martin T. Bohl; Janusz Brzeszczyński

doi:10.1016/j.intfin.2005.05.005

Do institutional investors destabilize stock prices? evidence from an emerging market

Martin T. Bohl^*, Janusz Brzeszczyński

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

30 Citations (Scopus)

Abstract

In this paper, we provide empirical evidence on the impact of institutional investors on stock market returns dynamics in Poland. The Polish pension system reform in 1999 and the associated increase in institutional ownership due to the investment activities of pension funds are used as a unique institutional characteristic. We find robust empirical evidence that the increase of institutional ownership has changed the autocorrelation and volatility structure of aggregate stock returns. However, the findings do not support the hypothesis that institutional investors have destabilized stock prices. The results are interpretable in favor of a stabilizing effect on index stock returns induced by institutional trading.

Original language	English
Pages (from-to)	370-383
Number of pages	14
Journal	Journal of International Financial Markets, Institutions and Money
Volume	16
Issue number	4
Early online date	31 Aug 2005
DOIs	https://doi.org/10.1016/j.intfin.2005.05.005
Publication status	Published - 1 Oct 2006
Externally published	Yes

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abstract = "In this paper, we provide empirical evidence on the impact of institutional investors on stock market returns dynamics in Poland. The Polish pension system reform in 1999 and the associated increase in institutional ownership due to the investment activities of pension funds are used as a unique institutional characteristic. We find robust empirical evidence that the increase of institutional ownership has changed the autocorrelation and volatility structure of aggregate stock returns. However, the findings do not support the hypothesis that institutional investors have destabilized stock prices. The results are interpretable in favor of a stabilizing effect on index stock returns induced by institutional trading.",

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AB - In this paper, we provide empirical evidence on the impact of institutional investors on stock market returns dynamics in Poland. The Polish pension system reform in 1999 and the associated increase in institutional ownership due to the investment activities of pension funds are used as a unique institutional characteristic. We find robust empirical evidence that the increase of institutional ownership has changed the autocorrelation and volatility structure of aggregate stock returns. However, the findings do not support the hypothesis that institutional investors have destabilized stock prices. The results are interpretable in favor of a stabilizing effect on index stock returns induced by institutional trading.

KW - Institutional traders

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KW - Stock market volatility

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IS - 4

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Do institutional investors destabilize stock prices? evidence from an emerging market

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