TY  - JOUR
AU  - Gompers,Paul A.
AU  - Metrick,Andrew
TI  - Institutional Investors and Equity Prices
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6723
PY  - 1998
Y2  - September 1998
UR  - http://www.nber.org/papers/w6723
L1  - http://www.nber.org/papers/w6723.pdf
N1  - Author contact info:
Paul Gompers
Harvard Business School
Baker Library 263
Soldiers Field
Boston, MA 02163
Tel: 617/495-6297
Fax: 617/496-8443
E-Mail: pgompers@hbs.edu

Andrew Metrick
Yale School of Management
135 Prospect Street
P.O. Box 208200
New Haven, CT 06520
Tel: 203/432-3069
E-Mail: metrick@yale.edu
M2  - featured in NBER digest on 1999-02-01
AB  - We analyze institutional investors' preferences for stocks and the implications that these preferences have for stock-market prices and returns.  We find that -- a category including all managers with greater than $100 million under discretionary control -- have nearly doubled their share of the common-stock market from 1980 to 1996 most of this increase driven by the growth in holdings of the largest one-hundred institutions. Large institutions, when compared with other investors, prefer stocks that have greater market capitalizations, are more liquid, and have higher book-to-market ratios and lower returns for the previous year.  We discuss how institutional preferences, when combined with the rising share of the market held by institutions, induce changes in the relative prices and returns of large stocks and small stocks.  We provide evidence to support the in-sample implications for prices and realized returns and we derive out-of-sample predictions for expected returns.
ER  -