The Granular Nature of Large Institutional Investors

Large institutional investors own an increasing share of the equity markets in United States. The implications this development for financial are still unclear. paper presents novel empirical evidence that ownership by large institutions predicts higher volatility and greater noise stock prices as well fragility times crisis. When studying channel, we find exhibit traits granularity (i.e., subunits within a firm display correlated behavior), which reduces diversification idiosyncratic shocks. Thus, trade larger volumes induce price impact. This was accepted David Simchi-Levi, finance.