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Short-Term Trading and Stock Return Anomalies: Momentum, Reversal, and Share Issuance

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  • Martijn Cremers
  • Ankur Pareek

Abstract

This article examines how the extent of short-term trading relates to the efficiency of stock prices. We employ a new duration measure based on quarterly institutional investors’ portfolio holdings, next to existing proxies such as trading volume, the percentage of transient institutions, and fund turnover. Momentum returns and subsequent returns reversal are generally much stronger for stocks held primarily by short-term investors, especially if these investors recently had superior recent performance which could make them overconfident. Our results point toward the behavioral theory in Daniel, Hirshleifer and Subrahmanyam (1998) and seem inconsistent with short-term institutions improving efficiency.

Suggested Citation

  • Martijn Cremers & Ankur Pareek, 2015. "Short-Term Trading and Stock Return Anomalies: Momentum, Reversal, and Share Issuance," Review of Finance, European Finance Association, vol. 19(4), pages 1649-1701.
    • Handle: RePEc:oup:revfin:v:19:y:2015:i:4:p:1649-1701.
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    File URL: http://hdl.handle.net/10.1093/rof/rfu029
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    References listed on IDEAS

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    1. Harrison Hong & Jeremy C. Stein, 2007. "Disagreement and the Stock Market," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 109-128, Spring.
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