Institutional Ownership And Informational Efficiency—Based On High-frequency Data

In recent years,institutional investors have developed rapidly and have become an important part in the financial market.In contrast with individual investors,institutional investors have more information channels and stronger information-processing ability.So,regulators hope they can improve the information quality of financial market.However,whether institutional investors can stabilize the market or improve informational efficiency is an open question.This paper uses tick-by-tick data of A shares listed in SSE to calculate daily informational efficiency of prices based on Hasbrouck's idea of price decomposition,and analyzes institutional holding's effects on informational efficiency.Empirical results show that,generally speaking,institutional holding ratio has remarkably negative effects on informational efficiency.What's more,this conclusion remains consistent when using different indicators of informational efficiency and liquidity,or restricting samples to Shanghai 180.However,through more careful analysis,this paper finds that,institutional holding ratio can affect informational efficiency positively in those stocks with highest liquidity,which indicating liquidity plays an extremely important role.Granger causality test shows that,institutional holding ratio is the Granger cause of informational efficiency,but the reverse doesn't establish,and there is a two-way Granger causality between liquidity and institutional holding.This result indicates that institutional holding can affect informational efficiency directly,and liquidity has indirect effects on informational efficiency by influencing institutional holding ratio.Since the whole sample period contains a bull-market period and a bear-market period,so this paper divides the sample period into two parts and carries out empirical analysis respectively.Results show that conclusions above remain consistent under both bull-market and bear-market background.This paper's conclusions indicate that the increasing institutional ownership didn't improve informational efficiency.It's important to regulate and guide institutional investors when striving to develop them.Liquidity has positive effects on informational efficiency and affects the relation between institutional holding and informational efficiency.So,improving the liquidity of financial market will be quite beneficial.