Additional factor in asset-pricing: Institutional ownership
Finance Research Letters, cilt.40, 2021 (SSCI, Scopus)
- 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.