This study examines the impact of institutional investors' equity ownership stability and their investment horizon to determine the impact on their investee firms' equity mispricing. Mispricing represents the difference between a firm’s market and fundamental values. We treat institutional investors as a heterogenous group, i.e., dedicated, transient, or quasi-indexer as defined by Bushee, 1998, Bushee, 2001 since their categorization determines their trading strategy. Higher institutional ownership, higher stability in institutional investors' equity ownership, and institutional investors classified as long-term are all associated with lower equity mispricing at investee firms.
Sakaki, Hamid and Jory, Surendranath and Jackson, Dave, Institutional Investors’ Ownership Stability and Their Investee Firms’ Equity Mispricing (February 1, 2019). Available at SSRN: https://ssrn.com/abstract=3138728 or http://dx.doi.org/10.2139/ssrn.3138728