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    Lee, Cheng-Few Liang, Woan-lih Lin, Fu-Lai and Yang, Yating 2015. Applications of simultaneous equations in finance research: methods and empirical results. Review of Quantitative Finance and Accounting,


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  • Journal of Financial and Quantitative Analysis, Volume 47, Issue 3
  • June 2012, pp. 667-688

The Value of Active Investing: Can Active Institutional Investors Remove Excess Comovement of Stock Returns?

  • Pengfei Ye (a1)
  • DOI: http://dx.doi.org/10.1017/S0022109012000099
  • Published online: 30 January 2012
Abstract
Abstract

This study uses Cremers and Petajisto’s (2009) method to separate active institutional investors from passive ones and shows that active investors can alleviate the anomalous comovement of stock returns. Focusing on 2 events linked to the excess comovement anomaly, Standard & Poor’s 500 Index additions and stock splits, I find that if an event stock has more active institutional investors trading in the post-event period, the anomalous comovement effect disappears. In contrast, if an event stock experiences a massive exit of active investors, this anomaly persists. The exit of active institutional investors also results in a strong price synchronicity effect.

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Journal of Financial and Quantitative Analysis
  • ISSN: 0022-1090
  • EISSN: 1756-6916
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