Abstract
I investigate whether it is possible to predict the aggregate net trades into a stock by financial institutions and to profitably trade on these predictions. I find that aggregate net trades can be predicted across forecast horizons ranging from 1 quarter to 20 quarters. Predicted institutional trades, defined as the forecasted cumulative net trades of all financial institutions into a stock over the following Q quarters scaled by a stock’s current number of shares outstanding, has a negative relation with returns. The low-high predicted institutional trades portfolio earns an annualized Fama and French alphas of 10.55%.
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