Investor heterogeneity and commonality in stock return and liquidity

Deng Pan, Jing Shi, Fei Wu, Bohui Zhang

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

This paper examines how the trading activities of different investor types are related to common return and liquidity movements. Using a unique dataset, we decompose the daily return and liquidity of individual stocks into price impact components attributable to trades of institutional investors and retail investors. We then investigate the variation of each component relative to market-wide return and liquidity. We show that institutional trades contribute more than retail trades to liquidity commonality. However, retail trades contribute more strongly to return co-movement. The incremental contribution of retail trades to the co-variability of stock returns is more pronounced for firms with high information asymmetry.
Original languageEnglish
Pages (from-to)458-473
Number of pages16
JournalEconomic Systems
Volume39
Issue number3
DOIs
Publication statusPublished - Sep 2015
Externally publishedYes

Keywords

  • investor heterogeneity
  • return co-movement
  • liquidity commonality
  • Shanghai stock exchange

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