Institutional Ownership, Information and Liquidity

Posted: 27 Nov 1996

See all articles by William W. Jennings

William W. Jennings

U.S. Air Force Academy - Department of Management

Karen Schnatterly

Virginia Tech; University of Missouri-Columbia

Paul J. Seguin

University of Minnesota - Twin Cities - Carlson School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: September 1996

Abstract

We examine whether market makers believe institutional trades are informed by examining relations between institutional ownership and quoted bid-ask spreads in general, and the adverse-selection component of the spread in particular. For our sample of Nasdaq stocks from 1983 through 1991, we find that high institutional ownership leads to narrower spreads and spreads with a smaller proportion attributable to asymmetric information. Our results are not attributable to institutions preferences for liquid securities. Our informativeness measure varies significantly across institutional type and is positively related to the largest block size held by an institutional owner.

JEL Classification: D82, G2, G32

Suggested Citation

Jennings, William W. and Schnatterly, Karen and Seguin, Paul J., Institutional Ownership, Information and Liquidity (September 1996). Available at SSRN: https://ssrn.com/abstract=7941

William W. Jennings

U.S. Air Force Academy - Department of Management ( email )

2354 Fairchild Drive
Suite 6H-94
Academy, CO 80840-2944
United States

Karen Schnatterly

Virginia Tech ( email )

Blacksburg, VA 24061
United States

University of Missouri-Columbia ( email )

332 Cornell Hall
Columbia, MO Columbia 65211
United States

Paul J. Seguin (Contact Author)

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States
(612) 626-7861 (Phone)

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