Investment Horizons, Systematic Risk, and Managerial Skills of Institutional Investors

50 Pages Posted: 27 Feb 2018

See all articles by Jiun-Lin Chen

Jiun-Lin Chen

University of Adelaide; Financial Research Network (FIRN)

Shih-Cheng Lee

Yuan Ze University

Chien‐Ting Lin

Deakin University - School of Accounting, Economics and Finance

Ping-Wen Sun

Minjiang University - Newhuadu Business School

Date Written: December 8, 2017

Abstract

We examine the relationship between portfolio risk and equity returns over different investment horizons of institutional investors. Compared to long-term institutions, portfolios held by short-term institutions exhibit higher factor loadings in market, size, and momentum. In particular, they tend to hold smaller stocks and momentum stocks in the bull market. They also tend to trade for stocks with lower profitability in the bull market. Nevertheless, we find that systematic risk can account for the overall superior performance in the buy and sell portfolios of short-term institutions. Our results suggest that while short-term institutions exhibit market timing ability, they do not always generate abnormal returns after controlling for systematic risk.

Keywords: institutional investors; investment horizons; portfolio risk; portfolio characteristics

JEL Classification: G11; G12; G14; G20

Suggested Citation

Chen, Jiun-Lin and Lee, Shih-Cheng and Lin, Chien‐Ting and Sun, Ping-Wen, Investment Horizons, Systematic Risk, and Managerial Skills of Institutional Investors (December 8, 2017). Available at SSRN: https://ssrn.com/abstract=3118196 or http://dx.doi.org/10.2139/ssrn.3118196

Jiun-Lin Chen

University of Adelaide ( email )

No 233 North Terrace, School of Commerce
Adelaide, South Australia 5005
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Shih-Cheng Lee

Yuan Ze University ( email )

135, Far-East Rd., Chung-Li
Taoyuan, ROC
Taiwan

Chien‐Ting Lin

Deakin University - School of Accounting, Economics and Finance ( email )

221 Burwood Highway
Burwood, Victoria 3215
Australia

Ping-Wen Sun (Contact Author)

Minjiang University - Newhuadu Business School ( email )

Fujian
China

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
89
Abstract Views
588
rank
350,789
PlumX Metrics