Bridge over ocean
1 March 1996 Financial Analysts Journal Volume 52, Issue 2

Volatility and the Institutional Investor

  1. Richard W. Sias

Inconsistent with the relationship predicted by most academic theory, a positive contemporaneous association is documented between the level of institutional ownership and security return volatility after accounting for capitalization. This relationship is consistent with two stories: Either riskier securities attract institutional investors, or an increase in institutional holdings results in an increase in volatility. These empirical results are consistent with the latter interpretation.

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