Stock Price Synchronicity, Crash Risk, and Institutional Investors

CFA Digest ◽  
2013 ◽  
Vol 43 (3) ◽  
Author(s):  
Mohammed Saqib
Keyword(s):  
Institutional Investors ◽  
Stock Price ◽  
Crash Risk ◽  
Stock Price Synchronicity

Stock price synchronicity and stock price crash risk

2016 ◽  
Vol 6 (3) ◽  
pp. 230-244 ◽  
Author(s):  
Yonghong Jin ◽  
Mengya Yan ◽  
Yuqin Xi ◽  
Chunmei Liu
Keyword(s):  
Stock Price ◽  
Risk Index ◽  
Mediating Effect ◽  
Crash Risk ◽  
Security Market ◽  
Herding Behavior ◽  
Stock Price Synchronicity ◽  
Content Type ◽  
Mediating Role ◽  
First Time

Purpose – The purpose of this paper is to empirically analyze the effects of stock price synchronicity and herding behavior of qualified foreign institutional investors (QFII) on stock price crash risk, especially the mediating effect of herding behavior of QFII on the relation of stock price synchronicity and stock price crash risk. Design/methodology/approach – Taking China’s A-share listed companies from 2005 to 2014 and QFII holding shares data as the research sample, this study calculates herding effect index, sock price synchronicity index and stock price crash risk index, and perform linear regression. Findings – This study concludes that, either herding behavior of QFII or the stock price synchronicity can increase the stock price crash risk. Further study reveals that, the herding behavior of QFII also improves the effect of stock price synchronicity on stock price crash risk. Namely, herding behavior of QFII acts as the mediating role between stock price synchronicity and stock price crash risk. Originality/value – This study empirically analyzes and verifies the mediating roles of herding behavior of QFII in affecting the relation of sock price synchronicity and stock price crash risk for the first time. The findings of this study contribute to the study of the role of QFII in stabilizing Chinese security market.

Institutional Investors’ Monitoring and Stock Price Crash Risk: Evidence from Politically Connected Firms

2018 ◽  
Vol 21 (04) ◽  
pp. 1850028 ◽  
Author(s):  
Chwee Ming Tee ◽  
Angelina Seow Voon Yee ◽  
Aik Lee Chong
Keyword(s):  
Institutional Investors ◽  
Stock Price ◽  
Positive Association ◽  
Institutional Ownership ◽  
Political Connections ◽  
Crash Risk ◽  
Different Types

Motivated by recent studies on political connections and stock price crash risk, this study investigates whether there is an association between politically connected (POLCON) firms and stock price crash risk. Further, we examine whether institutional investors’ ownership can moderate this association. Using a dataset of Malaysian firms for the period 2002–2012, we show that POLCON firms are associated with higher risk of stock price crashes. However, the positive association between POLCON and stock crashes is attenuated by higher institutional ownership, implying effective monitoring. Finally, we find that only local institutional investors can significantly mitigate the positive association between POLCON firms and stock price crash risk. This suggests that different types of institutional investors can produce different monitoring outcomes in POLCON firms.

Investor Structure and Stock Price Crash Risk in a Continuous Double Auction Market: An Agent-Based Perspective

2019 ◽  
Vol 18 (02) ◽  
pp. 695-715 ◽  
Author(s):  
Ruwei Zhao ◽  
Xiong Xiong ◽  
Dehua Shen ◽  
Wei Zhang
Keyword(s):  
Confidence Interval ◽  
Institutional Investors ◽  
Stock Price ◽  
Market Model ◽  
Crash Risk ◽  
Double Auction ◽  
Agent Based ◽  
Auction Market ◽  
Improved Stability ◽  
Continuous Double Auction

Multiple studies presume the institutional investors to be informed investors. However, some reports argue that this view is still under debate. In this paper, to avoid the informed investors proxy bias caused by the institutional investors, we construct an agent-based continuous double auction stock market model with both informed and uninformed investors and examine whether stock price crash risk can be affected by the change of investor structure. In particular, we employ four types of investor structures by gradually increasing percentage adjustments of informed investors from 20%, 40%, 60% to 80% within the market. We find that stock clear price and return show significant improved stability coming with the rising weight of informed investors. Beyond that, we recognize the situation that stock clear price falls below 95% confidence interval as crash event and count the number of the stock price crash events within each simulation of each different investor structure. We find that consistent with growing stability of stock clear price and return, stock price crash event number drops dramatically following the higher proportion of informed investors. These findings confirm our hypothesis that the involvement of informed investors contributes to the market stability.

scholarly journals Evolutionary Game Model of Stock Price Synchronicity from Investor Behavior

2020 ◽  
Vol 2020 ◽  
pp. 1-9
Author(s):  
Yue Dong ◽  
Yuhao Zhang ◽  
Jinnan Pan ◽  
Tingqiang Chen
Keyword(s):  
Stock Market ◽  
Institutional Investors ◽  
Stock Price ◽  
Replicator Dynamics ◽  
Evolutionary Game ◽  
Equilibrium Strategy ◽  
Individual Investors ◽  
Game Model ◽  
Stock Price Synchronicity ◽  
The Cost

Institutional and individual investors are the two important players in the stock market. Together, they determine the price of the stock market. In this paper, an evolutionary game model that contains the two groups of players is proposed to analyze the stock price synchronicity considering the impacts of investors’ decisions on stock investment. Factors affecting investors’ decisions include the potential revenue or loss, the probability of gain or loss, and the cost of corresponding behavior. The proposed game model is analyzed by replicator dynamics equations and simulation of the evolutionary equilibrium strategy under different circumstances. The analysis shows that the operating cost of institutional investors, the cost of information collection before trading, and the expected loss that may be punished by regulators are the key factors that affect the evolutionary game system between institutional investors and individual investors. In addition, reducing the speculation in the market and increasing the information access of investors through the serious operation mode of institutional investors and the strengthening of the market information disclosure mechanism are beneficial to alleviate price synchronicity in stock market.

scholarly journals Stock price synchronicity, sustainability reports, and earnings quality

2021 ◽  
Vol 10 (1) ◽  
pp. 139-148
Author(s):  
Utari Dian Pratiwi ◽  
Erwin Saraswati ◽  
Arum Prastiw
Keyword(s):  
Institutional Investors ◽  
Stock Price ◽  
Stock Exchange ◽  
Earnings Quality ◽  
Moderating Effect ◽  
External Information ◽  
Stock Price Synchronicity ◽  
Internal Information ◽  
Sustainability Reports

Stock Price Synchronicity is a calculation used to show the proportion of the company's internal and external information accumulated into the stock price. This study aims to examine internal information in the form of sustainability reports and earnings quality on stock price synchronicity. Furthermore, this study also aims to examine the moderating effect of institutional investors as an indicator of sophisticated investors. The population in this study is a go-public manufacturing company on the Indonesia Stock Exchange (BEI). The sample was determined by the purposive sampling method. This research uses multiple regression analysis methods with a panel data form. The results showed that companies with a higher quality of sustainability reports had lower stock price synchronicity and institutional investors did not have a moderating effect in this relationship. The results also show that companies that have higher earnings quality have high stock price synchronicity as well. This relationship changes when the institutional investor moderation variable is added. Companies with higher earnings quality have lower stock price synchronicity values.

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