The Performance of Short-term Institutional Trades
Chakrabarty, Bidisha; Moulton, Pamela; Trzcinka, Charles
Using a database of daily institutional trades, we document that a majority of short-term institutional trades lose money. In aggregate, over 23% of round-trip trades are held for less than three months, and the returns on these trades average -3.91% (non-annualized). These losses are pervasive across all types of stocks, with the lowest returns occurring in small stocks, value stocks, and low-momentum stocks. Short-term trades lose more in more volatile markets. Across funds, the worst short-term returns accrue to funds that do the most trading, and there is no evidence of persistent skill or disposition effect in short-term institutional trades.
institutional trading; short-term trades; trading skill; information
Final version forthcoming as: Chakrabarty, B., Moulton, P. C., & Trzcinka, C. (2017). The performance of short-term institutional trades. Journal of Financial and Quantitative Analysis: doi:10.1017/S0022109017000400.
Required Publisher Statement: © Michael G. Foster School of Business, University of Washington 2017. Final version forthcoming as: Chakrabarty, B., Moulton, P. C., & Trzcinka, C. (2017). The performance of short-term institutional trades. Journal of Financial and Quantitative Analysis: doi:10.1017/S0022109017000400. Reprinted with permission. All rights reserved.