Additional factor in asset-pricing: Institutional ownership

Uğurlu-Yıldırım E., Şendeniz-Yüncü İ.

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

  • Publication Type: Article / Article
  • Volume: 40
  • Publication Date: 2021
  • Doi Number: 10.1016/
  • Journal Name: Finance Research Letters
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus, ABI/INFORM
  • Keywords: Asset-pricing, Institutional ownership, Stock market, INVESTOR SENTIMENT, CROSS-SECTION, MARKET, RISK, PRICES
  • Middle East Technical University Affiliated: Yes


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.