significantly different from zero at the 1% level. Moreover, the four-factor model risk-adjusted returns and benchmark-adjusted returns show similar results. That is, institutional trading is significantly and negatively related to future stock returns. Moreover, consistent with the results in the previous section, Panel B of Table 5 shows that the of net-selling portfolio (P01) is higher than that of net-buying BE/ME portfolio (P10). Moreover, there is a negative relationship between and AdjDIND There seems to be no clear association between and size. AdjDITH. AdjDITH is also positively associated with prior returns, indicating that they are AdjDITH positive feedback traders. They tend to net-buy past winners and net-sell past losers. The portfolio results based on adjusted changes in individual ownership (AdjDIND) are reported in Table 6. Evidence indicates that firms with higher earn higher subsequent raw returns. However, the equal- (value-) weighted AdjDIND average of the monthly raw return difference between stocks in the highest decile and stocks in the lowest decile is an insignificantly positive 0.28% (0.17%). Consistent with the results in the previous section, Panel B reveals that there is an increasing pattern of and a decreasing pattern of size as increases. Moreover, BE/ME AdjDIND individual investors are contrarian investors; that is, they net-buy prior losers and prior winners. <Insert Tables 5 and 6 about here> As robustness checks, we use a second method to examine the relation between institutional trading (individual trading) and stock returns. In Table 7, we present a cross-sectional regression analysis at the firm level. Using the Fama and MacBeth (1973) procedure, we report the time-series averages of slopes from the monthly cross-sectional regressions of stock returns on size, and BE/ME, AdjDITH, AdjDIND. The model 8 shows that the coefficients on and size are 0.16 and -0.14, which BE/ME
significantly different from zero at the 1% level. Moreover, the four-factor model risk-adjusted returns and benchmark-adjusted returns show similar results. That is, institutional trading is significantly and negatively related to future stock returns. Moreover, consistent with the results in the previous section, Panel B of Table 5 shows that the BE/ME of net-selling portfolio (P01) is higher than that of net-buying portfolio (P10). Moreover, there is a negative relationship between AdjDIND and AdjDITH. There seems to be no clear association between AdjDITH and size. AdjDITH is also positively associated with prior returns, indicating that they are positive feedback traders. They tend to net-buy past winners and net-sell past losers. The portfolio results based on adjusted changes in individual ownership (AdjDIND) are reported in Table 6. Evidence indicates that firms with higher AdjDIND earn higher subsequent raw returns. However, the equal- (value-) weighted average of the monthly raw return difference between stocks in the highest decile and stocks in the lowest decile is an insignificantly positive 0.28% (0.17%). Consistent with the results in the previous section, Panel B reveals that there is an increasing pattern of BE/ME and a decreasing pattern of size as AdjDIND increases. Moreover, individual investors are contrarian investors; that is, they net-buy prior losers and prior winners. <Insert Tables 5 and 6 about here> As robustness checks, we use a second method to examine the relation between institutional trading (individual trading) and stock returns. In Table 7, we present a cross-sectional regression analysis at the firm level. Using the Fama and MacBeth (1973) procedure, we report the time-series averages of slopes from the monthly cross-sectional regressions of stock returns on BE/ME, size, AdjDITH, and AdjDIND. The model 8 shows that the coefficients on BE/ME and size are 0.16 and -0.14, which
092-JPins_20th-PBF_2012%208%2019.docx