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NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by H. Eugene Stanley

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November 2005Institutional Investors and Stock Market Volatility
with Xavier Gabaix, Parameswaran Gopikrishnan, Vasiliki Plerou: w11722
We present a theory of excess stock market volatility, in which market movements are due to trades by very large institutional investors in relatively illiquid markets. Such trades generate significant spikes in returns and volume, even in the absence of important news about fundamentals. We derive the optimal trading behavior of these investors, which allows us to provide a unified explanation for apparently disconnected empirical regularities in returns, trading volume and investor size.

Published: Gabaix, Xavier, Parameswaran Gopikrishnan, Vasiliki Plerou and H. Eugene Stanley. "Institutional Investors And Stock Market Volatility," Quarterly Journal of Economics, 2006, v121(2,May), 461-504. citation courtesy of

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers only

 
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