The Effect of Institutional Shareholding on the Informational Efficiency of Stock Prices: Evidence from the Hang Seng Index
Date of Submission
Campus Only Senior Thesis
Bachelor of Arts
© 2014 Chun Yin Lo
This paper uses survey data by the Hong Kong Stock Exchange (HKEx) from 1991-2013 to test the role that institutional ownership has on the relative informational efficiency of stock prices in the Hang Seng Index, using the R2 of stock prices as a measurement of efficiency. This paper finds that on the aggregate level, the presence of institutional ownership is positively associated with R2, reflecting a negative effect on the level of information incorporated into stock prices. However, in isolating foreign institutions, the relationship with R2 reverses, and I find a positive correlation with the informational efficiency of stock prices. Moreover, this paper finds that a period characterized by high growth in institutional shareholding does not necessarily correspond to a greater level of improvement in the informational environment of stock markets. The results however, lack significance, perhaps due to the shortcomings of the survey data which is limited to 21 annual observations when incorporating a t-1 year lag. With more observations we would expect a substantial increase in the significance of the coefficient on our explanatory variables.
Lo, Chun Yin, "The Effect of Institutional Shareholding on the Informational Efficiency of Stock Prices: Evidence from the Hang Seng Index" (2015). CMC Senior Theses. 1029.
This thesis is restricted to the Claremont Colleges current faculty, students, and staff.