Institutional investors and stock returns volatility: Empirical evidence from a natural experiment

Martin T. Bohl*, Janusz Brzeszczyński*, Bernd Wilfling*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

36 Citations (Scopus)

Abstract

In this paper, we provide empirical evidence on the impact of institutional investors on stock market returns dynamics. 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. Performing a Markov-switching-GARCH analysis we find empirical evidence that the increase of institutional ownership has temporarily changed the volatility structure of aggregate stock returns. The results are interpretable in favor of a stabilizing effect on index stock returns induced by institutional investors.

Original languageEnglish
Pages (from-to)170-182
Number of pages13
JournalJournal of Financial Stability
Volume5
Issue number2
Early online date6 Mar 2008
DOIs
Publication statusPublished - 1 Jun 2009
Externally publishedYes

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