Abstract
We examine the impact of institutional investor heterogeneity on the firm’s information environment and trading. We argue that treating institutional investors as a single group of sophisticated investors masks fundamental differences in investor ability to gather and analyze information, which play a crucial role in the firm’s information environment. We find that heterogeneity in characteristics of institutional investors related to their informedness about the firm (proxied by investor size, general, stock-specific and local expertise, investor type, and portfolio focus, as well as ex post portfolio performance) increases abnormal trading volume around corporate news, above and beyond the effects of the average level of investor information about the firm.
Published Version
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