Institutional investors and stock returns volatility: Empirical evidence from a natural experiment

Martin T. Bohl, Janusz Brzeszczynski, Bernd Wilfling

    Research output: Contribution to journalArticle

    29 Citations (Scopus)

    Abstract

    In this paper, we provide empirical evidence on the impact of institutional investors on stock market returns dynamics. The Polish pension system reform in 1999 and the associated increase in institutional ownership due to the investment activities of pension funds are used as a unique institutional characteristic. Performing a Markov-switching-GARCH analysis we find empirical evidence that the increase of institutional ownership has temporarily changed the volatility structure of aggregate stock returns. The results are interpretable in favor of a stabilizing effect on index stock returns induced by institutional investors. © 2008 Elsevier B.V. All rights reserved.

    Original languageEnglish
    Pages (from-to)170-182
    Number of pages13
    JournalJournal of Financial Stability
    Volume5
    Issue number2
    DOIs
    Publication statusPublished - Jun 2009

    Keywords

    • Institutional traders
    • Markov-switching-GARCH model
    • Pension fund investors
    • Polish stock market
    • Stock market volatility

    Fingerprint Dive into the research topics of 'Institutional investors and stock returns volatility: Empirical evidence from a natural experiment'. Together they form a unique fingerprint.

    Cite this