Skip to main content
Unpublished Paper
Institutional Ownership and Return Predictability Across Economically Unrelated Stocks
Conference Proceedings, Presentations, and Speeches
  • George P Gao, Cornell University
  • Pamela Moulton, Cornell University School of Hotel Administration
  • David T Ng, Cornell University
Document Type
Article
Publication Date
7-10-2015
Abstract
We document strong weekly lead-lag return predictability across stocks from different industries with no customer-supplier linkages (economically unrelated stocks). Between 1980 and 2010, the industry-neutral long-short hedge portfolio earns an average of over 19 basis points per week. This return predictability arises exclusively from pairs of stocks in which there are common institutional owners. This predictability is a new phenomenon which does not originate from the slow information diffusion underlying previously documented lead-lag effects, weekly reversals, momentum, nonsynchronous trading, or other known factors. Our findings suggest that institutional portfolio reallocations can induce return predictability among otherwise unrelated stocks.
Comments

Required Publisher Statement
Copyright held by the authors.

Original paper presented at the 23rd Annual Conference on Financial Economics and Accounting November 16 and 17, 2012, Los Angeles, CA.

Citation Information

Gao, G. P., Moulton, P. C., & Ng, D. T. (2015, July). Institutional ownership and return predictability across economically unrelated stocks [Electronic version]. Retrieved [insert date], from Cornell University, SHA School site: http://scholarship.sha.cornell.edu/conf/1/