Essays on investor sentiment and institutional trading momentum

Update Item Information
Title Essays on investor sentiment and institutional trading momentum
Publication Type dissertation
School or College David Eccles School of Business
Department Entrepreneurship & Strategy
Author Bulsiewicz, James Gerard
Date 2016
Description This dissertation is composed of 3 chapters on the topics of investor sentiment and institutional trading momentum. In the first chapter, I investigate whether the returns to cross-sectional anomalies reported in the finance literature are due to investor sentiment. I present evidence of a weak relation between cross-sectional anomalies and investor sentiment. Using a larger collection of cross-sectional anomalies, I find that only a small subsample of these anomalies exhibits a relation with investor sentiment. This result does not appear to be due to certain anomalies being more sensitive to changes in macroeconomic conditions. Further I show that the predictive power of sentiment diminishes significantly after controlling for the Fama and French factors. These results suggest that the returns to active trading strategies are generally not due to sentiment-driven mispricing. In the second chapter, I investigate whether the relation between investor sentiment and cross-sectional anomalies is due to short sale constraints. I find that the average security in these strategies is not hard-to-short. Furthermore, the short leg does not appear to be harder to short or more overvalued than the long leg. However, I find that these strategies are more illiquid and have higher institutional ownership following low sentiment. These results imply that the relation between investor sentiment and profitable trading strategies could be due to illiquidity and institutional trading, rather than short sale constraints. Finally, in the third chapter I investigate whether the collective trades of financial institutions create mispricing in the stock market. Previous studies have generally found a positive relation between institutional demand and short-term returns, consistent with the interpretation that institutional trading pushes prices towards fundamental values. However, these studies do not control for the general and firm-specific trends in institutional ownership. After removing the trend in institutional ownership using the Hodrick-Prescott filter, I find strong evidence that financial institutions create substantial mispricing in the market. There is a large reversal in both returns and ownership following periods when ownership is abnormally high or low.
Type Text
Publisher University of Utah
Subject Anomalies; Institutional Demand; Institutional Trading Momentum; Investor Sentiment; Mispricing
Dissertation Name Doctor of Philosophy in Business Administration
Language eng
Rights Management ©James Gerard Bulsiewicz
Format application/pdf
Format Medium application/pdf
Format Extent 2,030,983 bytes
Identifier etd3/id/4168
ARK ark:/87278/s6kt00x5
Setname ir_etd
ID 197715
Reference URL https://collections.lib.utah.edu/ark:/87278/s6kt00x5
Back to Search Results