The Impact of Institutional Trading on Stock Prices


Lakonishok, Josef, Andrei Shleifer, and Robert W Vishny. 1992. “The Impact of Institutional Trading on Stock Prices.” Journal of Financial Economics 32 (1).


This paper uses new data on the holdings of 769 tax-exempt (predominantly pension) funds. to evaluate the potential effect of their trading on stock prices. We address two aspects of trading by these money managers: herding, which refers to buying (selling) simultaneously the same stocks as other managers buy (sell), and positive-feedback trading, which refers to buying past winners and selling past losers. These two aspects of trading are commonly a part of the argument that institutions destabilize stock prices. The evidence suggests that pension managers do not strongly pursue these potentially destabilizing practices.

Last updated on 08/02/2012