INSTITUTIONAL TRADES AND INTRADAY STOCK-PRICE BEHAVIOR

This paper examines the price effect of institutional stock trading, u sing a unique data set that reports the transactions (large and small) of 37 large institutional money management firms. The direction of ea ch trade and the identity of the management firm behind each trade are known. Although institutional trades are associated with some price p ressure, we find that the average effect is small. There is also a mar ked asymmetry between the price impact of buys versus sells. We relate our findings to various hypotheses on the elasticity of demand for st ocks, the cost of executing transactions, and the determinants of mark et impact. Although market capitalization and relative trade size infl uence the market impact of a trade, the dominant influence is the iden tity of the money manager behind the trade.