An Investigation of Stock Selection Ability between Institutional and Individual Investors

Subject Areas : Journal of Investment Knowledge

Ahmad  Ahmadpour ¹ (professor of Accounting university of mazandaran (Corresponding Author))
Hadi  qorbani ² (MA university of mazandaran)

Received: 2012-11-05 Accepted : 2013-02-08 Published : 2013-02-08

Keywords: Institutional investors, Individual Investors, Stock selection ability,

Abstract :

this study investigates stock selection ability between institutional and individual investors. Methodology in this study is based on the intuitive idea that if institutional investors are better at selecting stocks than individual investors, then institutional investors are more likely to buy future winners and sell future losers. while controlling for other factors, such as size and momentum effects, the institutional and individual investor daily trading were regressed on future stock performance. The result of the study dose not show any apparent difference in stock selection ability between individuals and institutional investors. Coefficient of independent variable with dependent variable has positive and negative relation but none of them are significant. Thus first Hypothesis as Changes in institutional investor ownership are related with subsequent abnormal returns is rejected. Second Hypothesis Changes in individual investor ownership are negatively correlated with subsequent abnormal returns is rejected too.