Institutional Trading and the Turn-of-The-Year Effect

38 Pages Posted: 22 Jul 2003

See all articles by Lilian Ng

Lilian Ng

Schulich School of Business, York University; European Corporate Governance Institute (ECGI)

Qinghai Wang

University of Central Florida - College of Business Administration

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Abstract

This study provides evidence that links institutional trading behavior directly to anomalous turn-of-the-year (TOY) return patterns of small stocks. We find that TOY trading patterns of institutions reflect strategies that are generally consistent with window-dressing and risk-shifting behaviors. Institutions sell more loser small stocks in the last quarter of the year, but buy more small stocks, both winners and losers, in the first quarter. Institutional buying (selling) of loser stocks at year-end weakens (strengthens) the TOY effect. In addition, buying of winner stocks after year-end causes a statistically-significant, though weaker, effect.

Keywords: Institutions, Window-Dressing, Risk-Shifting, Turn-of-the-Year Effect

JEL Classification: G12, G14, G20

Suggested Citation

Ng, Lilian and Wang, Qinghai, Institutional Trading and the Turn-of-The-Year Effect. Available at SSRN: https://ssrn.com/abstract=412183 or http://dx.doi.org/10.2139/ssrn.412183

Lilian Ng (Contact Author)

Schulich School of Business, York University ( email )

N223, Seymour Schulich Building
4700 Keele Street
Toronto, Ontario ON M3J 1P3
Canada
+1.416.736.2100 x77994 (Phone)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Qinghai Wang

University of Central Florida - College of Business Administration ( email )

PO Box 161400
Orlando, FL 32816
United States

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