Publication Date

1-22-2016

Abstract

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.

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This work has been revised and is forthcoming as: Chakrabarty, B., Moulton, P. C., & Trzcinka, C. (2017). The performance of short-term institutional trades. Journal of Financial and Quantitative Analysis: doi:10.1017/S0022109017000400. The updated version is available here.

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