Additional factor in asset-pricing: Institutional ownership

Uğurlu-Yıldırım E., Şendeniz-Yüncü İ.

Finance Research Letters, cilt.40, 2021 (SSCI) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 40
  • Basım Tarihi: 2021
  • Doi Numarası: 10.1016/j.frl.2020.101697
  • Dergi Adı: Finance Research Letters
  • Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus, ABI/INFORM
  • Anahtar Kelimeler: Asset-pricing, Institutional ownership, Stock market, INVESTOR SENTIMENT, CROSS-SECTION, MARKET, RISK, PRICES
  • Orta Doğu Teknik Üniversitesi Adresli: Evet

Özet

In this paper, we hypothesize that institutional investor variable is a proxy for some systematic risk factors, which should be incorporated into the asset-pricing model. Mimicking portfolio for institutional ownership, called IMI (Institutional minus Individual), is constructed. Including IMI to the Carhart's 4-factor model captures the common variations in returns better than all other models that are tested. Consistent with the literature, the new 5-factor model improves mispricing mostly in portfolios including stocks with the lowest and the highest institutional ownership. Empirical findings demonstrate that IMI most likely proxies for noise-trader risk.