Additional Factor in Asset Pricing: Institutional Ownership

Dr. Ecenur Uğurlu Yıldırım

Abstract

In this paper, we hypothesize that institutional investor variable might be a proxy for some systematic risk factors, such as asymmetric information risk, noise trader risk, or agency problem, which should be incorporated into the asset-pricing model. Our data encompasses 4320 firms listed on NYSE, NASDAQ and AMEX that are traded between January 1980 and December 2016. Mimicking portfolio for institutional ownership, called IMI (Institutional minus Individual), is constructed. Including IMI to the Carhart’s 4-factor model captures the common variations in returns better than all other models that are tested. Consistent with the literature, the new 5-factor model improves mispricing mostly in portfolios including stocks with the lowest and the highest institutional ownership. When we test the empirical relationship between IMI and possible risk factors it proxies, results suggest that IMI most likely proxies to asymmetric information risk.

Short Bio

Dr. Ecenur Uğurlu Yıldırım received her BSc degree in Business Administration from Hacettepe University in 2009, and her Master’s Degree in Economics from University of Essex in 2010, where she was awarded “Economics Department Prize for the Best MSc Dissertation” for her thesis titled “An Empirical Analysis of the Relationship Between Financial Development and Economic Growth, with Application to Turkey”. In March 2018 she received her Ph.D. degree in Finance from Middle East Technical University with her thesis titled “Institutional Ownership as an Additional Factor to Describe Stock Returns”. Her academic interests include Asset-Pricing, Corporate Finance, and International Finance; in which she currently has two published papers in journals indexed in SSCI. Her teaching experiences include “Principles of Finance” and “Financial Management” (MBA) courses in Middle East Technical University as a teaching assistant, and “Risk Management for International Business” course in Yıldırım Beyazıt University as an instructor.

Venue

Wednesday, March 21, 2018 at 2pm in room 103