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.
Chakrabarty, B., Moulton, P. C., & Trzcinka, C. (2016). The performance of short-term institutional trades [Electronic version]. Retrieved [insert date], from Cornell University, SHA School site: http://scholarship.sha.cornell.edu/workingpapers/20