Who Blinks in Volatile Markets, Individuals or Institutions?


  • Patrick J. Dennis,

  • Deon Strickland

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    • Dennis is from the University of Virginia and Strickland is from the U.S. Securities and Exchange Commission. We thank Susan Chaplinsky Wake Epps; John Nofsinger; Adam Reed; an anonymous referee; the seminar participants at the American Finance Association, the College of William and Mary, the Ohio State University, the Securities and Exchange Commission, and the University of Virginia for valuable comments and discussions. We both thank Kate Sallwasser for editorial assistance. Dennis thanks the McIntire School of Commerce for financial support. Strickland thanks the Fisher College of Business and the Dice Center for financial support. The Securities and Exchange Commission, as a matter of policy, disclaims responsibility for any private publication or statement by any of its employees. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the Commission or of the author's colleagues on the staff of the Commission.


We investigate the relationship between the ownership structure and returns of firms on days when the absolute value of the market's return is two percent or more. We find that a firm's abnormal return on these days is related to the percentage of institutional ownership, that there is abnormally high turnover in the firm's shares on these days, and that this abnormal turnover is significantly related to the percentage of institutional ownership in the firm. Taken together, these results are consistent with positive feedback herding behavior on the part of some institutions, particularly mutual and pension funds.