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Zhen Lei (Arthur)

is a Ph.D. candidate in finance at the School of Accounting and Finance, The Hong Kong Polytechnic University. His research interests cover theoretical and empirical asset pricing, litigation risk, and dynamic principal-agent theory. His works and views have been presented in major finance and accounting conferences such as American Accounting Association annual conference, FMA Asia/Pacific Conference, and various conferences held by institutions and journals such as California Management Review, Journal of Accounting, Auditing and Finance, etc. Zhen Lei (Arthur) earns his Bachelor of Arts in Finance from the Southwestern University of Finance and Economics, and M.S. in Finance from The Johns Hopkins University. Prior to studying at PolyU, his experience covered investment banking that deals with initial public offerings and Chinese outbound mergers & acquisitions.

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Zhen Lei: Liquidity effects of institutional investment horizons

We examine whether institutional investors with different investment horizons exert different influences on a stock’s liquidity. Our findings show that stocks increased by short-term institutions become more liquid while stocks increased by long-term institutions become less liquid. Furthermore, short-term institutions pay more attention to changes in a firm’s recent fundamentals than long-term institutions and changes in liquidity effects resulting from holding changes of short-term institutions have more explanation power on stock returns in the next quarter than those resulting from long-term institutions, suggesting short-term are more informed about a firm’s short-term fundamentals than long-term institutions. Finally, we find increased holdings of both short-term and long-term institutions for a stock caused by improvement in a firm’s fundamentals generally make the stock more liquid, suggesting institutional demand provides a channel through which a firm’s fundamental can influence its stock liquidity.

Last modified: 2018.11.30.