NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Institutional Investors and Stock Market Volatility

Xavier Gabaix, Parameswaran Gopikrishnan, Vasiliki Plerou, H. Eugene Stanley

NBER Working Paper No. 11722
Issued in November 2005
NBER Program(s):   AP   EFG

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.

download in pdf format
   (575 K)

email paper

This paper is available as PDF (575 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w11722

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

Users who downloaded this paper also downloaded these:
Diebold and Yilmaz w14269 Macroeconomic Volatility and Stock Market Volatility, Worldwide
Poterba and Summers w1462 The Persistence of Volatility and Stock Market Fluctuations
Schwert w2798 Why Does Stock Market Volatility Change Over Time?
Gompers and Metrick w6723 Institutional Investors and Equity Prices
Baker and Wurgler w13189 Investor Sentiment in the Stock Market
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us