Vortrag | Prof. Dr. Oliver Spalt (Universität Mannheim) | The Impact of Institutional Investors on Equity Prices: Evidence From A Reform of U.S. Trust Law
Vortrag im Rahmen des Finance and Insurance Seminars
Dienstag, 29. November 2022 - 16:15, JUR 253, Universitätsstraße 14-16, 48143 Münster
Prof. Dr. Oliver Spalt (Professor für Betriebswirtschaftslehre, Area Banking, Finance and Insurance, Universität Mannheim) spricht im Rahmen des Finance and Insurance Seminars zum Thema:
The Impact of Institutional Investors on Equity Prices: Evidence From A Reform of U.S. Trust Law
Absract: "We study the equity market implications of a reform in the laws that govern trust investments, implemented in a staggered fashion across U.S. states from 1986 to 2007. The introduction of the prudent investor rule systematically alters the relative attractiveness of stocks within the cross-section of U.S. equities for trust funds. As trust funds account for a substantial fraction of institutional equity holdings in our sample period, our empirical setting provides a rare opportunity to study the impact of a regulatory change on institutional investor holdings and relative prices in the U.S. equity market. We show that in response to the law change, trusts rebalance their portfolios away from “prudent” stocks, which were implicitly advantaged under the old regulatory regime. Stocks bought by trusts after the law change substantially outperform stocks sold by those funds. The return effects are long-lasting and do not revert over the next 12 months. The results in our paper suggest that shocks to institutional investor demand can have a profound and sustained influence on stock prices and that regulatory changes can have large indirect, and potentially unintended, consequences for market prices."
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