The Influence of Institutional Investors' Position on Stock Momentum Phenomenon

Abstract

Momentum phenomenon is one of the most classic anomalies in the field of securities investment. This paper investigates the influence of institutional investors' opening behavior on stock return momentum phenomenon by using the annual investor shareholding data publicly disclosed by listed companies. The findings are as follows: First, there is a positive correlation between institutional investors' opening behavior and stock excess return in one year; Second, if there is an obvious momentum phenomenon in the stock return in the first two years, then the stock return in the next year still depends on the institutional investor's position behavior, and has nothing to do with the investor's momentum strategy. Under the condition that other conditions remain unchanged, for the positive momentum group, if institutional investors buy portfolios substantially in the next year, the stock momentum phenomenon will continue; On the contrary, stock reversal occurs. A similar conclusion was found for the negative momentum group. In addition, the study also found that the momentum phenomenon is statistically significant, but because stock returns cannot be predicted in advance, it is not meaningful in the actual investment process. Therefore, this paper supports and complements the efficient market hypothesis to some extent.