Additional factor in asset-pricing: Institutional ownership

2020-01-01
Uğurlu-Yıldırım, Ecenur
Şendeniz Yüncü, İlkay
In this paper, we hypothesize that institutional investor variable is a proxy for some systematic risk factors, which should be incorporated into the asset-pricing model. Mimicking portfolio for institutional ownership, called IMI (Institutional minus Individual), is constructed. Including IMI to the Carhart's 4-factor model captures the common variations in returns better than all other models that are tested. Consistent with the literature, the new 5-factor model improves mispricing mostly in portfolios including stocks with the lowest and the highest institutional ownership. Empirical findings demonstrate that IMI most likely proxies for noise-trader risk.

Citation Formats
E. Uğurlu-Yıldırım and İ. Şendeniz Yüncü, “Additional factor in asset-pricing: Institutional ownership,” Finance Research Letters, pp. 0–0, 2020, Accessed: 00, 2020. [Online]. Available: https://hdl.handle.net/11511/43114.