Behavior Of Institutional Investors Research Articles

PORTFOLIO DIVERSIFICATION WITH BITCOIN. EVIDENCE FROM INSTITUTIONAL INVESTORS PERSPECTIVE

The paper investigates the empirical verification of the efficacy of investment diversification using the main stock exchange indices in the Eurozone countries and Bitcoin. The paper also investigates whether and to what extent it is desirable for institutional investors, in addition to traditional financial instruments, to invest in Bitcoin. The aim of the research is to examine whether it is justified and to what extent to include Bitcoin in the portfolio of an institutional investor. Through this research, an attempt is made to find an answer to the research question: “What share of Bitcoin in the portfolio structure is justified, taking into account the ratio of return and risk”? The analysis includes data on the daily movement of selected action indices as well as the movement of Bitcoin. The methodology involves the analysis of high-frequency data, given that daily trading data were used. The results show that it is justified to include Bitcoin in the portfolio structure. Also, the results show which share of Bitcoin in the portfolio is justified from the aspect of institutional investors. The data used in the analysis cover the period from 2019 and 2020. Two portfolios have been created, one without Bitcoin and the other with Bitcoin. The goal in optimization for both portfolios is to minimize risk. The observed period of the analysis is characterized by the crisis caused by the coronary virus pandemic and the period of active bitcoin trading. The results of the research show that Bitcoin is a good source of diversification in a portfolio that contains traditional financial instruments, both for an investor who is not prone to risk, and for those investors who have a greater appetite for risk. The conclusion is that the rational behavior of institutional investors requires consideration of investing in Bitcoin using the Markowitz model. However, given the high degree of volatility, investors should be careful when making decisions about including Bitcoin in their investment portfolio. Bitcoin is an extremely volatile instrument. Given that it is a speculative and highly volatile financial instrument, investors have different views on Bitcoin. First in terms of defining this cryptocurrency and then in terms of including this instrument in the investment portfolio. By including Bitcoin in the investment portfolio, the goal of diversification has been achieved. This is to reduce the risk of the institutional investor to a minimum. In practice, this means that it is possible to create a portfolio that carries an acceptable level of risk with the desired level of return. Given that Bitcoin is an extremely volatile and consequently - risky instrument, the expected return is also - high. The results of the research show that the cryptocurrency Bitcoin can serve as a desirable instrument for diversification of the investment portfolio when looking at a portfolio that includes stock indices. The results suggest that it is desirable to include in the structure of the portfolio a certain share of Bitcoin, about 6%.

RETRACTED ARTICLE: The effect of firm size, industry type and ownership structure on the relationship between firms' sustainable innovation capability and stock liquidity

Does the company attach importance to research and development (R&D) investment in its operations? Is stock liquidity detrimental to corporate innovation and thus damages the company’s sustainable development capabilities? We estimate the relationship between between stock liquidity and firms’ sustainable innovation capability on China’s stock market by OLS method and difference in difference (DID) method. The traditional conclusion is: the higher the stock liquidity, the weaker the enterprise's sustainable innovation level, especially in state-owned enterprises. The DID estimation using the share-trading reform and the policy of large and small-sized non-tradable share shows that: stock liquidity will affect the sustainable innovation level of the enterprise positively. The reasons for this mechanism are the supervision mechanism in the operation of the enterprise, the effect of the balance of the ownership structure and the improvement of corporate governance. The conclusions are that the improvement of ownership concentration promotes this positive relationship, and the behavior of institutional investors does not have a significant impact. These findings also provide new insights into the relationship between corporate management and shareholder investment behavior on the level of innovation.

Trading behavior of institutional investors and CEO's market timing

We use excess return, risks, MB ratios, and cumulative abnormal return as proxies to examine the CEO's market timing. The empirical results indicate that CEOs have been exactly in timing the market for Seasonal equity offering (SEO) events. CEOs have more incentives to execute seasonal equity offering when CAR reach peak and market risk drop to the lowest point that investors become less worried about risks. Evidence also shows that institutional investors do not own insider information before SEO but when issuance date appears, they recognize that CEOs are exploiting insider information in order to issue stocks at the highest price. Hence, the institutional investors switch their trading behavior from long positions to short positions to dodge the potential losses inflicted by the CEO's market timing. The fund manager recognizes that CEOs are implementing market timing so they can earn a positive return in the future. In contrast, security dealers and foreign investors do not recognize the CEO's market timing action, so they do not react, resulting in negative returns in the future.

On the Gaming Behavior of Institutional Investors’ Participation in Corporate Governance

<p>Following the very rapid development of the real manufacturing economy in China, institutional investors in China have been <span style="font-family: 'Times New Roman';">expand</span>ing rapidly, which is of positive significance for standardizing the financial market and promoting the reform of the market economy and the development of the manufacturing economy. At present, pension funds as well as mutual funds in China take the lead, and investors from various institutions are directing the domestic securities market to implement the institutionalized physical reform of the investment body. However, much of the current equity of enterprises in China, especially most private enterprises, is <span style="font-family: 'Times New Roman';">held by</span> controlling shareholders, with less equity held collectively by these institutional investors. Moreover, with the imperfection of our domestic capital management market, institutional investors tend to be <span style="font-family: 'Times New Roman';">even </span>less motivated as well as less concerned about participating in corporate governance. How to promote the governance effectiveness of institutional investors has been the focus of experts and scholars in the development process of enterprises. Therefore, focusing on the gaming perspective, this paper analyzes in depth the factors that affect the governance behavior of institutional investors, and puts forward relevant suggestions based on the above issues, aiming to give full play to the effectiveness of governance of each institutional investor in enterprises.</p>

Institutional Investors Herding Behaviour under Analysts Rating

This paper selects 64 quarters of institutional investor data from 2005 to 2020 as a sample, and uses the LSV model to measure the herding behaviour of institutional investors. The static panel model of the effect is used to explore the performance of institutional investors' herd behaviour under good news and bad news, and the impact on the cumulative excess returns of stocks in a certain period of time in the future. The study found that Chinese institutional investors have irrational herd behaviour, and naturally show significant buying herd behaviour when external information is favourable, and show significant selling herd behaviour under bad information. The degree of buying herd behaviour on good news is lower than that of selling herd behaviour on bad news, and as the number of securities analysts tracking stocks in the market increases, the information is more fully exposed.

How volatility affects the behaviour of institutional investors in emerging markets

The investments made by domestic institutional investors (DII) have turned out to be a dynamic force for the development of Indian stock markets. This situation has motivated me to study the nexus between DII's capital flows and stock market volatility. Most studies have taken mutual funds as the proxy for DII. This paper has considered the disintegrated data of DII, which includes mutual funds and insurance companies, banks, and development financial institutions (DFI). The study discloses that out of four DII, insurance companies increase the market volatility. On the other hand, trading of banks, mutual funds, and DFI are helping to decrease the volatility in stock markets. Thus, they contribute to correct the overreaction in stock markets resulting from noise trading. Moreover, all the DII's act as informed traders because they take advantage of the volatile markets for investments.

How volatility affects the behaviour of institutional investors in emerging markets

How volatility affects the behaviour of institutional investors in emerging markets

Network Theory and the Cooperative Behavior of Institutional Investors: A Look at the Association of British Insurers, the Institutional Voting Information Service and the Investor Forum

Network Theory and the Cooperative Behavior of Institutional Investors: A Look at the Association of British Insurers, the Institutional Voting Information Service and the Investor Forum

Who Pays Attention to Climate Risk: Evidence from Korea

We investigate the effect of COVID-19 on the investors’ awareness about climate risk. The COVID-19 have led investors to draw a parallel between pandemic and climate risks, renewing investors’ attention to climate change. Using a novel dataset of trading by each investor types for Korean listed firms, we compare trading behaviors of institutional investors and retail investors. We find that institutional investors divest away from high-emission firms, but on the contrary retail investors do not curtail financing for these companies. Overall, our results confirm the heterogeneity of investor preferences for climate finance.

CORPORATE STRATEGY DEVIATION AND INSTITUTIONAL INVESTOR RECOGNITION: COMPLEX NETWORK-BASED AND GRAPH CLUSTERING ANALYSIS

In this paper, the quantitative analysis is implemented on the relationship between strategy deviation of listed firms and institutional investors’ recognition. For research methodology, financial complex networks and clustering techniques are employed to measure the de-gree of recognition by creating links to the common stockholding behaviour of institutional investors. Besides, quarterly panel data from 2006 to 2020 are constructed for an innovative study of the degree of recognition of institutional investors’ strategy deviation of listed firms under different innovation fields, firm properties, and market style heterogeneity and asymmetry. The stability test is conducted by the transformation of the measures and methods, thereby effectively avoiding the “cluster fallacy”. We validate the mechanism by which the differences in strategic choices and propensities of listed firms affect capital market recognition, and enrich the microscopic research perspective and methodology on related issues.

Institutional investor sentiment and the mean-variance relationship: Global evidence

Although a cornerstone of traditional finance theory, empirical evidence in support of a positive mean-variance relation is far from conclusive, with the behavior of retail investors commonly thought to be one of the root causes of departures from this expected relationship. The behavior of institutional investors, conventionally thought to be sophisticated and rational, has recently come under closer scrutiny, including in relation to investor sentiment. Drawing together these two strands of literature, this paper examines the impact of institutional investor sentiment on the mean-variance relation in six regions, including Asia (excl. Japan), Eastern Europe, Eurozone, Japan, Latin America, and the US, and across thirty-eight markets. Empirical evidence supports the differential impact of institutional investor sentiment on the mean-variance relation (i.e., positive or negative), both across regions and across markets. In particular, for markets with cultural proneness to overreaction and a low level of market integrity institutional investor sentiment tends to distort the risk-return tradeoff.

An Examination of the Weekdays’ Anomaly in the Trading Behavior of Institutional Investors in the Post-Demonetization and GST Regime in India

This study analyzed the trading activities of foreign portfolio investors (FPIs) and Indian mutual funds (IMFs) across weekdays. The present study aimed to enrich the literature related to the efficient market hypothesis and day-of-the-week anomaly present in the trading behavior of FPIs and IMFs across weekdays. The study examined the daily purchasing, selling, and net investing activities of FPIs and IMFs in equity instruments of the Indian capital market for 3.1 years, beginning November 1, 2016 and ending November 30, 2019. During this period, the Indian capital markets adjusted to the up-and-down sentiments of market players in the context of demonetization and GST regimes. This study aimed to achieve two objectives, that is, examining the day-of-the-week effect on trading activities of FPIs and IMFs and comparing the trading patterns of FPIs and IMFs on individual trading days with the rest of the weekdays with the help of autoregressive dummy variable regression, ANOVA, and independent-sample t - test. It was empirically determined by the present study that there was a day-of-the-week effect present in the behaviors of both foreign and domestic institutional investors. Monday, Thursday, and Friday were ascertained to have the most significant impact on the trading activities of institutional investors. Hence, individual investors can avail the opportunities to reap extraordinary returns from the Indian capital markets by closely monitoring institutional investors’ trading activities.

How Behavioral Factors Influence Investment Performance of Individual Investors in Pakistan Stock Market: A Moderated Mediation Approach

The primary objective of study is to know the influence of behavioral factors on investor’s investment decision and investment performance. Four behavioral factors as herding, prospect factors and market factors are used in this study and financial literacy as a moderating variable among the behavioral factors and investment decision. We use the questionnaire to collect primary data from individual investors actually trading in Pakistan Stock Exchange. For data analysis, we utilize AMOS software and Hayes Process tool in two stages. The findings reveal that behavioral factors positively influence investment decision and investment performance. But there is no moderating role of financial literacy. In addition to these, individual investors and security organizations can ultimately take advantage from the results of this research as a guide for their analysis and forecasting of security market trends in order to maximize the outcome and to improve their investment efficiency. Further, study recommended investigation of all investor types and in all financial markets including the behaviors of institutional investors along with behavioral financial factors; we should consider some economic factors that could have an impact on investors' decisions.

State financial interests and changes in investment behavior of institutional investors: the case of financial market development in Israel

AbstractInstitutional investors are key actors in the financial markets of diverse developed economies. Their tendency toward diversification and risk-taking behavior is well documented, yet insufficient attention has been paid to the sources of this behavior. Based on the case of emerging financial markets in Israel, this paper argues that in adopting various neoliberal reforms, state agencies induced institutional investors to change their investment behavior toward diversification and greater risk-taking. Until the early 2000s, Israel’s institutional investors were marginal actors in a financial system designed to support state-building, primarily investing in government bonds and bank deposits. As changing state financial interests induced market changes, institutional investors emerged as autonomous actors, diversifying their investments to also include corporate bonds, stocks and investments in foreign financial markets. With individuals’ growing dependency on institutional investors for their financial security, greater insight into the role of state agencies in financial markets could help identify factors affecting their functioning in financial capitalism.

Does the research meeting affect the shareholding ratio of institutional investors in listed companies? Empirical evidence from China

PurposeThis paper discusses whether institutional investors change the shareholding ratio of listed companies through research meeting, and whether this active investment mode can really improve the investment efficiency of institutional investors.Design/methodology/approachUsing empirical research method, this study designs and conducts an empirical research according to empirical research's basic norms. Thus, we acquire needed and credible empirical data. This study analyzes whether institutional investors seek their private interest in researched companies by analyzing their research meetings and the shareholding ratios of different types of institutional investors using Shenzhen Stock Exchange data on listed firms from 2014 to 2018.FindingsThis study finds that the research meetings of institutional investors provide participants with reliable information which supports the decision of institutional investors to change their shareholding ratio. The stock price growth rate strengthens the positive correlation between the research meetings of institutional investors and the shareholding ratio of institutional investors. Additionally, transactional institutional investors increase the shareholding ratio, while holding institutional investors do not.Originality/valueThis paper combines the behavior of institutional investors with the holding status of institutional investors, and discusses the impact of institutional investors' behavior on investment decisions. At the same time, it classifies the institutional investors and discusses the attitude of different types of institutional investors towards this active investment mode.

Ownership structure and corporate social responsibility in India: empirical investigation of an emerging market

PurposePrevious studies have examined the relationship between institutional investors and corporate social responsibility (CSR) engagement primarily for the case of developed nations. The purpose of this paper is to look at the association between different ownership categories and CSR spending of selected Indian firms within an emerging market context.Design/methodology/approachThis study examines the motivations that guide the CSR strategies of different ownership groups. Random-effects Tobit panel regression is performed on a panel of BSE-listed non-financial Indian firms panel comprising of 5,313 firm year observations over a six-year period (2014-2019).FindingsHeterogeneous behavior of institutional investors is revealed through the study. Different categories of institutional investors have different preferences for CSR spending of a firm. Lending institutes and foreign institutional investors (FIIs) are seen to support the CSR investments. However, mutual fund investors are seen to not influence the CSR spend by the firms. Further, the results show that family ownership, measured in terms of family shareholding, positively moderates the lending institutions and mutual funds toward CSR and does not impact the FIIs decision regarding the CSR investments.Practical implicationsThe analysis has implications for both institutional investors and multinational firms. In the emerging market context, managers and owners who target long term strategies such as CSR, will benefit from increasing shareholdings of creditors (lending institutions). They can also take steps to improve their transparency and corporate governance structure so as to attract the foreign institutional investments.Originality/valueManagers cannot ignore the heterogeneities of institutional investors in their investment decisions and hence CSR decisions need to align with those of different types of investors. This study adds to the existing literature by offering new empirical insights from the perspective of an emerging market, India.

Can Institutional Investor Clique Play a Governance Role? Based on the Perspective of Insider Reduction

This article takes China’s A-share non-financial industry listed companies from 2007 to 2015 as a sample, starting from the social network algorithm, to study whether the grouping behavior of institutional investors in the network can affect the degree of executive reduction in the future. The study found that there is a significant positive correlation between the shareholding ratio of institutional investors in group holdings and the degree of future reduction of executives. This article explores the interactive behavior of Chinese institutional investors in the network, and expands the research of institutional investors on corporate governance and executives’ future reduction behaviors.

Extreme Rainfall and Institutional Investor Behavior

We investigate institutional investor behavior and firm valuation surrounding extreme rainfall conditions in rain-sensitive firms. Using Indian monsoon data and exploiting extreme rainfall conditions as ongoing natural experiments, we show that institutional investors significantly increase (decrease) their ownership in rain-sensitive firms during the excess (deficit) rainfall years. Despite the extreme rainfall conditions we show that institutional investors gain from investing in rain-sensitive firms during excess periods, as those firms have superior financial performance in the following period. Further analysis shows that although both domestic and foreign institutional investors increase their ownership in rain-sensitive firms following excess rainfall periods, only domestic institutional investors significantly divest from rain-sensitive firms in deficit periods. Our results support the view that extreme climate conditions can impact firm value and change investor behavior.

In Vogue Again: The Re-Rise of SPACs in the IPO market

Were we to distill 2020 into a single word, from the capital markets’ perspective at least, it would certainly be SPACs, which – although to a different extent – are now having their momentum on both shores of the pond. If, in the US, SPACs are really enjoying a new lease of life due to the pandemic, as if they were Charon ferrying markets through the darkest of waters, although they are not comparable to what happens across the Atlantic, data in Europe seem to be growing steadily.This article focuses on SPACs in the US pre-COVID scenario (between January 2010 and December 2019), in order to understand their structural changes over the years and the grounds for their recent resurgence. Firstly, it aims to identify the length and profitability of such an investment phenomenon and understand the behavior of institutional investors in this context. Then, the possible investment shifts in the sector of SPACs, driven by the 2020 post COVID bubble, are analyzed, relying on data retrieved from different providers and players, and specifically focusing on three main current concerns: the increasing litigation phenomenon, the (resulting) increase in D&O insurance costs, and the engagement of PIPEs as guarantors of the soundness and of the successful outcome of the transaction.Undoubtedly, in the near future, US SPACs will hold a foreground role, not plunging back into the shadows (or even worse into the darkness that they had been living in for years), and will certainly be able to update and evolve for good, as they showed themselves capable of doing in the past, thereby overcoming problems and perplexities raised about them.

Ispitivanje portfolio optimizacije ulaganjem u berzanske indekse i bitkoin

This paper presents an empirical verification of the effectiveness and usefulness of investment diversification using the main stock exchange indices and Bitcoin. The objective is to determine the effects applying the Markowitz portfolio optimization theory, i.e., the advantages of applying the modern portfolio theory for institutional investors. The research offers an answer to the following question: what are the advantages and disadvantages of using Bitcoin in portfolio optimization? The paper contributes to the representation of the reach and limitations of the modern portfolio theory for institutional investors. The conclusion is that rational behaviour of institutional investors requires consideration of portfolio optimization using the Markowitz model, because it is possible to create portfolios which, on the basis of historical returns, provide desired returns alongside certain risks. The methodology includes the analysis of high frequency data, i.e., daily trading data were used. The results indicate that the use of the Markowitz portfolio selection method, with all its limitations, is desirable, possible and applicable, but that it entails serious flaws in the sense of neglecting transaction costs, foreign exchange differences and the real value in the stock market. The results of the research show that Bitcoin is a good source of diversification in a portfolio that contains traditional financial instruments both for the risk-averse investor as well as for those investors who have a greater appetite for risk. The conclusion is that rational behavior of institutional investors requires consideration of investing in Bitcoin using the Markowitz model. However, given the high degree of volatility, investors should be very careful when making decisions about including Bitcoin in the portfolio.