Do Institutional Investors Destabilize Stock Prices? Evidence from an Emerging Market

Martin T. Bohl and Janusz Brzeszczynski

No 501, CERT Discussion Papers from Centre for Economic Reform and Transformation, Heriot Watt University

Abstract: In this paper, we provide empirical evidence on the impact of institutional investors on stock market returns dynamics in Poland. The Polish pension system reform in 1999 and the associated increase in institutional ownership due to the investment activities of pension funds are used as an unique institutional characteristic. Performing a variant of the event study methodology in an asymmetric GARCH framework we find robust empirical evidence that the increase of institutional ownership has changed the autocorrelation and volatility structure of aggregate stock returns. However, the findings do not support the hypothesis that institutional investors have destabilized stock prices. The results are interpretable in favor of a stabilizing effect on index stock returns induced by institutional trading.

Keywords: institutional traders; Polish stock market; pension fund investors; stock market volatility; asymmetric GARCH models (search for similar items in EconPapers)
JEL-codes: G14 G23 (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-cfn, nep-fin and nep-rmg
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Journal Article: Do institutional investors destabilize stock prices? evidence from an emerging market (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:hwe:certdp:0501

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