Working Papers

Information Acquisition of Institutional Investors: Implications for Institutional Herding

This paper studies the extent and the implication of institutional investors acquiring information about the holdings of other institutional investors. Using a novel data on institutional investors' access of 13-F filings, I provide the first direct evidence of institutional investors seeking out institutional holding information. Surprisingly, institutional investors follow the institutional crowd, but trade against other institutional investors whose holding information was acquired. The contrarian strategy manifests strongly in a sell-buy relationship and earns positive abnormal returns. I find evidence consistent with institutional investors profit from price pressure reversals and use 13-F filings as a shortlist of stocks for further in-depth research.

with Shiyang Huang, Yifei Mao and Dexin Zhou

    • Presented at: Mid-Atlantic Research Conference (MARC 2018), Northern Finance Association (NFA 2018), China International Conference in Finance (CICF 2018), Entrepreneurial Finance Conference Program (2018)

Recent years have seen a dramatic increase in investment by public market institutional investors in the private market. We study the economic consequences of these investments for the initial public offerings of startups. We find that institutions' pre-IPO participation is associated with lower IPO underpricing for VC-backed startups. Our further analysis shows that the reduction in IPO underpricing does not appear to be driven by endogenous matching between startups and institutions. We explore the underlying economic mechanisms, and our results are consistent with a substitution effect between institutions and all-star analysts.

CEO vs. Consumer Confidence: Investment, Financing, and Firm Performance

with T. Clifton Green and Byoung-Hyoun Hwang

    • Presented at: All Georgia Finance Conference (2014), Cornell University (2014), Maastricht University (2014), Mitsui Finance Symposium (2014), University of California Riverside (2015)

We examine to what degree corporate managers take cues for investors. Using similarly constructed measures of CEO optimism and consumer optimism, our analysis provides evidence that, holding CEO optimism constant, CEOs substantially increase their capital expenditures and net financing when investors are more optimistic. CEOs, however, trade against investor optimism in their own personal trading accounts. And, while CEO optimism positively predicts firm performance, investor optimism negatively predicts firm performance and subsequent earnings surprises. Taken together, our findings suggest that investor beliefs strongly affect corporate investment; in particular, it appears that better-informed managers sometimes succumb to investor pressure or use times of high investor optimism to empire build.