The Impact of Institutional Investors on the Monday Seasonal*

Su Han Chan Department of Finance, California State University-Fullerton Wai-Kin Leung Faculty of Business Administration, Chinese University of Hong Kong Ko Wang Department of Finance, California State University-Fullerton The Impact of Institutional Investors on the Monday Seasonal* I. Introduction One of the most noticeable anomalies documented in the finance literature is the Monday seasonal. This anomalous Monday return pattern is observed not only in stock markets in the U. S. (see, for example, French (1980)) and other parts of the world (see, for example, Jaffe, Westerfield, and Ma (1989)), but also in debt markets (see, for example, Flannery and Protopapadakis (1988)). Numerous explanations have been developed to rationalize the puzzling observations that the mean return on Monday is significantly negative and is lower than that on other weekdays (i.e., the Monday seasonal). One of the most plausible * The authors acknowledge helpful comments from Kalok Chan, John Erickson, Tsong Yue Lai, Laura Starks, John Wei, and seminar participants at the Hong Kong University of Science and Technology. The authors are indebted to an anonymous referee, whose detailed comments have significantly improved the paper. The usual disclaimer applies. (Journal of Business, 2004, vol. 77, no. 4) B 2004 by The University of Chicago. All rights reserved. 0021-9398/2004/7704-0012$10.00 It is well documented that the mean Monday return is significantly negative and is lower than the mean return on other weekdays. Using institutional stock holdings information during the 1981 1998 period, we document that the Monday seasonal is stronger in stocks with low institutional holdings and that the Monday return is not significantly different from the mean Tuesday to Friday returns for stocks with high institutional holdings during the 1990 1998 period. Our study provides direct evidence to support the belief that the Monday seasonal may be related to the trading activities of less sophisticated individual investors. 967

968 Journal of Business explanations is the trading pattern of individual investors. 1 According to Miller (1988) and Lakonishok and Maberly (1990), individual investors typically do not have time during the weekday trading hours and therefore process information and make investment decisions only during the weekend. In addition, since brokers who tend to issue more buy than sell order recommendations do not work on the weekend, individual investors are less likely to be affected by brokers buy order recommendations when they make their investment decisions during the weekend. Lakonishok and Maberly (1990) provide empirical evidence to support this view. They find that when the market reopens on Monday individual investors tend to increase trading activity (especially sell transactions) on that day. Because of the increased selling activity by individual investors on Monday relative to the rest of the week, it is possible that an association exists between the trading behaviour of individual investors and the Monday seasonal. However, there is yet to be direct evidence indicating that those stocks traded by individual investors on Monday are actually the stocks that cause the average price decline in the stock market on Monday. Kamara (1997) reports that the Monday seasonal declines over the 1962 1993 period for stocks in the S&P 500 index, but not for stocks in the index of NYSE s smallest capitalization decile. He believes that the decline in trading costs and the increased role of institutions in the stock market can explain this phenomenon. However, because Kamara s observations are based only on the S&P 500 index and the small-cap index (which represent only a small fraction of stocks traded on the NYSE), it is difficult to draw a concrete conclusion as to whether the average decline in the stock market on Monday can be attributed to the lack of institutional ownership in certain stocks. 2 The above is especially true given Sias and Starks s (1995) finding. Using a sample of stocks traded on the NYSE during the 1977 1991 period, they find essentially no evidence of differences in Monday returns between stocks with high institutional ownership and stocks with low institutional ownership. 3 Furthermore, conditional on the previous Friday s return and controlling for firm size, Sias and Starks 1. Other explanations include settlement period (see Lakonishok and Levi (1982)), measurement error or specialist-related explanation (see Keim and Stambaugh (1984)), institutional factors (see Flannery and Protopapadakis (1988)), and correlation with Friday return (see Damodaran (1989) and Abraham and Ikenberry (1994)). 2. However, analyzing S&P 500 future and spot returns and small-cap returns on Mondays, Kamara (1997) makes a convincing argument that informed traders use less costly markets to exploit the Monday seasonal. 3. Kamara (1997) uses the ratio of block trading to odd-lot trading to proxy for institutional trading while Sias and Stark (1995) use the institutional ownership level of stocks traded on NYSE (reported by Vickers Stock Research Corporation) to conduct their analysis. This might explain the difference in their findings.

The Impact of Institutional Investors on the Monday Seasonal 969 (1995) find that the Monday seasonal is more pronounced in stocks with higher institutional ownership. It should be noted, however, that the sample period of Sias and Starks s (1995) study ends in 1991 and therefore their result does not fully capture the change in the U.S. equity markets caused by the significant increase in institutional holdings in the stock market after 1990. (We document the increase in the role of institutional investors later in Table 1 of this paper.) In sum, the results from studies on the relationship between the level of institutional investors and the magnitude of the Monday seasonal seem to be sample specific and inconsistent with each other. It should be noted that prior studies use small samples and/or firms limited to NYSE. However, it is well known that the Monday seasonal exists not only for stocks traded on the NYSE, but also in other stock markets. For example, Wang, Li and Erickson (1997) document that the Monday seasonal is more severe in the Nasdaq market than in the NYSE during the 1962 1993 period. In this paper we also show that Nasdaq stocks, which have higher transaction costs and exhibit the strongest Monday seasonal among the three stock markets in the early years, also have relatively lower institutional holdings than NYSE and Amex stocks during the same period. 4 Consequently, it seems necessary to conduct a more comprehensive analysis using firm-specific information on institutional holdings for all stocks traded on the NYSE, Amex, and Nasdaq to confirm whether the trading patterns of individual investors can explain the magnitude of the Monday seasonal. This paper examines the relation between the Monday seasonal and the percentage of institutional holdings using all stocks traded on the NYSE, Amex and Nasdaq over the 1981 1998 period. We report that the post-1990 period is associated with a significant increase in institutional holdings in the U.S. stock market and that the magnitude of the Monday seasonal diminished during this period. Although there is a possibility that the less negative mean return on Mondays for the 1990s could be the result of the bull market during this period, this is less of a concern because we also document that stock portfolios with high institutional holdings exhibit a weaker Monday seasonal than stock portfolios with low institutional holdings. In addition, we find that the mean Monday returns of stock portfolios with high institutional holdings are mostly positive (and are not significantly different from the mean returns on other weekdays) during the 1990 1998 period. Our result provides direct evidence that the Monday seasonal is related to the trading patterns of less sophisticated individual investors. This finding seems to be consistent with the growing body of literature 4. For a partial list of studies on the Nasdaq market, see Huang and Stoll (1996), Chan and Lakonishok (1997), Keim and Madhavan (1997), Bessembinder (1999), Christie and Schultz (1999) and Barclay et al. (1999).

970 Journal of Business documenting that institutional investors trading strategies affect the movement of security prices. 5 Section II of this paper describes our data gathering procedure while section III reports the patterns of institutional holdings during the 1981 1998 period. Section IV provides our empirical findings. The last section contains our conclusions. II. Data Gathering Procedure To gather institutional holdings and stock returns data, we first obtain from the Center for Research in Security Prices (CRSP) the permanent numbers, CUSIP numbers, and names of all firms traded on the NYSE, Amex and Nasdaq during the 1981 1998 period. We then obtain information on the number of shares held by institutional investors from the Spectrum 3:13 ( f ) Institutional Stock Holdings Survey during the same period. (This data source is available on the Spectrum tapes provided by Computer Directions Advisors). Finally, we combine data from the Spectrum tapes with data in the CRSP tapes to create the sample for this study. Only firms with both confirmed institutional information as well as stock return information are included in the final sample. (Appendix A provides details of the data selection and combination process.) The number of firms in our sample monotonically increases over time. We have 4,304 firms and 8,569 firms with complete information in 1981 and 1998, respectively. The percentage of institutional holdings is computed as the number of shares held by institutional investors in the second quarter (June 30) of the year (obtained from Spectrum) divided by the number of shares outstanding at the end of that quarter (obtained from CRSP). III. Patterns of Institutional Holdings During our sample period, institutional investors have become more dominant players in the stock market in the later years. Except for the 1983 1984 and 1987 1988 periods, we find that the percentage of institutional holdings is a monotonically increasing function of time. The mean percentage of institutional holdings of stocks traded in all the three markets (NYSE, Amex, and Nasdaq) is 14.6% in 1981, 21.9% in 1990, and 31.0% in 1998. On the other hand, the percentage of stocks with zero institutional holdings decreases from 11.6% in 5. For a partial list of those studies, see Lakonishok, Shleifer, and Vishny (1992), Wang, Chan, and Gau (1992), Chan and Lakonishok (1993 and 1995), Keim and Madhavan (1995), Grinblatt, Titman, and Wermers (1995), Badrinath, Kale, and Noe (1995), Wang, Erickson, Gau, and Chan (1995), Sias and Starks (1997), and Nofsinger and Sias (1999).

The Impact of Institutional Investors on the Monday Seasonal 971 1981 to 3.7% in 1990, and to 2.4% in 1998. For NYSE firms, the average percentage of institutional holdings is 25.7% in 1981 and 44.2% in 1998. The mean institutional holdings for Amex and Nasdaq firms are 9.1% and 8.3%, respectively in 1981 and 18.6% and 25.4%, respectively in 1998. Table 1 presents summary statistics on the distribution of institutional holdings for NYSE, Amex and Nasdaq firms during the 1981 1989, 1990 1998, and 1981 1998 periods. Panel A of Table 1 reports that the percentage of institutional holdings for all firms in all the three stock markets in the 1990 1998 period (27.0%) is significantly higher (t-statistics = 65.21) than that in the 1981 1989 period (18.5%). If we believe that institutional investors are better informed about the Monday seasonal than individual investors are, then our evidence suggests that stock markets should become more efficient in the recent years. Panels B, C, D, and E of Table 1 show that NYSE firms on average have a significantly higher percentage of institutional holdings than both Amex firms and Nasdaq firms in the period of analysis. When Amex firms are compared to Nasdaq firms, Panel E of Table 1 shows that Amex firms have a significantly higher percentage of institutional holdings during the 1981 1989 period, but a significantly lower percentage of institutional holdings during the 1990 1998 period. From 1981 to 1998, institutional holdings in Nasdaq stocks show a substantial increase of over 206% (from 8.3% in 1981 to 25.4% in 1998) while the increases for Amex and NYSE stocks are 104% (from 9.1% in 1981 to 18.6% in 1998) and 72% (from 25.7% in 1981 to 44.2% in 1998), respectively. The significant change in the level of institutional ownership in the Nasdaq market suggests that an examination of the relationship between institutional investors and price behavior in the Nasdaq market might yield interesting results. IV. Empirical Findings A. Patterns of Monday Returns To examine whether the magnitude of the Monday seasonal changes with the increase in institutional investors in the stock market, we calculate the mean Monday return and the mean Monday minus Tuesday to Friday return by period (1981 1989, 1990 1998 and 1981 1998) and by stock market. Panels A, B, C, and D of Table 2 report that, regardless of the stock market chosen, the mean Monday return and the mean Monday minus Tuesday to Friday return are higher in the 1990 1998 sub-period than in the 1981 1989 sub-period. While it is possible that the less negative mean Monday return in the 1990 1998 period could be the result of the bull market of the 1990s, this market condition should also affect the mean returns on

972 Journal of Business TABLE 1 Institutional Holdings by Market and by Period for All NYSE, Amex, and Nasdaq Firms, 1981 1998 Period 1981 89 1990 98 1981 98 Panel A: Institutional Holdings for Firms in All Three Markets Mean 0.185 0.270 0.234 Median 0.116 0.201 0.161 Maximum 0.999 1.000 1.000 Ratio of firms with zero holdings 0.065 0.020 0.039 Number of observations 48865 65761 114626 Panel B: Institutional Holdings for NYSE Firms Mean 0.324 0.394 0.366 Median 0.315 0.403 0.362 Maximum 0.996 1.000 1.000 Ratio of firms with zero holdings 0.002 0.003 0.003 Number of observations 13822 20575 34397 Panel C: Institutional Holdings for Amex Firms Mean 0.139 0.176 0.158 Median 0.086 0.112 0.098 Maximum 0.938 1.000 1.000 Ratio of firms with zero holdings 0.021 0.006 0.014 Number of observations 6620 7082 13702 Panel D: Institutional Holdings for Nasdaq Firms Mean 0.128 0.220 0.181 Median 0.065 0.152 0.110 Maximum 0.999 0.994 0.999 Ratio of firms with zero holdings 0.106 0.032 0.064 Number of observations 28423 38104 66527 Panel E: T-Statistics for the Differences in Mean Institutional Holdings between Firms in Different Markets NYSE vs. Amex 72.5** 75.8** 105.5** NYSE vs. Nasdaq 98.3** 81.1** 121.0** Amex vs. Nasdaq 5.3** 17.7** 13.6** Note. The above summary statistics are based on data for the second quarter (June 30) of each year during the period. The ratio of shares held by institutional investors for each firm is computed as the total number of shares of the firm held by institutional investors at the end of the second quarter divided by the number of shares outstanding. The number of observations reported in the table includes both firms with positive as well as zero institutional holdings. *, ** Significant at the 10% and 5% levels for a two-tailed test, respectively. other weekdays during the same period as well. Since we also find that the magnitude of the mean Monday minus Tuesday to Friday return is significantly reduced in the 1990 1998 period, it is more likely that the weaker Monday seasonal during this period is associated with an increase in institutional stock holdings in the markets. We note that NYSE, which has the highest average percentage of institutional holdings among the three markets during each of the

The Impact of Institutional Investors on the Monday Seasonal 973 TABLE 2 Mean Monday and Mean Monday Minus Tuesday to Friday Returns (%) for All NYSE, Amex, and Nasdaq Stocks Partitioned by Period and Market, 1981 1998 (T-statistics in Parentheses) Period 1981 89 1990 98 1981 98 Panel A: For all NYSE, Amex, and Nasdaq Stocks Combined Difference in Returns between 1990 98 and 1981 89 Period Mean Monday Return 0.183 0.031 0.107 0.152 (4.21**) (0.88) (3.82**) (2.74**) Mean Monday minus Tuesday Friday Return 0.299 0.182 0.240 0.118 (6.51**) (4.86**) (8.09**) (2.01**) Panel B: For NYSE Stocks Mean Monday Return 0.145 0.010 0.068 0.155 (2.65**) (0.29) (2.09**) (2.40**) Mean Monday minus Tuesday Friday Return 0.265 0.059 0.163 0.206 (4.62**) (1.63) (4.75**) (2.91**) Panel C: For Amex Stocks Mean Monday Return 0.178 0.046 0.112 0.132 (3.65**) (1.53) (3.90**) (2.31**) Mean Monday minus Tuesday Friday Return 0.310 0.184 0.247 0.126 (5.99**) (5.62**) (8.05**) (2.13**) Panel D: For Nasdaq Stocks Mean Monday Return 0.207 0.050 0.129 0.157 (5.40**) (1.34) (4.77**) (2.93**) Mean Monday minus Tuesday Friday Return 0.317 0.248 0.283 0.069 (7.77**) (6.12**) (9.78**) (1.22) Panel E: T-Statistics for the Differences in Returns between Firms in Different Markets Mean Monday Return NYSE vs. Amex (1.90*) (3.38**) (3.72**) NYSE vs. Nasdaq (2.57**) (3.81**) (4.24**) Amex vs. Nasdaq (1.70*) (0.25) (1.41) Mean Monday minus Tuesday Friday Return NYSE vs. Amex (0.62) (2.66**) (1.93*) NYSE vs. Nasdaq (0.83) (3.57**) (2.83**) Amex vs. Nasdaq (0.16) (1.33) (0.96) Note. The Monday minus Tuesday to Friday return refers to the difference (%) between the Monday return and the average Tuesday to Friday return of the same week. *, ** Significant at the 10% and 5% levels for a two-tailed test, respectively.

974 Journal of Business 1981 1989, 1990 1998, and 1981 1998 periods, also has the highest (least negative) mean Monday return and mean Monday minus Tuesday to Friday return during the same period. It is also interesting to note that during the 1981 1989 sub-period Nasdaq has the lowest percentage of institutional holdings and also has the lowest mean Monday return and mean Monday minus Tuesday to Friday return among the three markets. Panel E of Table 2 provides t-statistics on the differences in mean Monday returns and the differences in mean Monday minus Tuesday to Friday returns between stocks in NYSE, Amex, and Nasdaq. The result indicates that the mean Monday returns for NYSE stocks are significantly higher (less negative) than that for Amex and Nasdaq stocks in all the three periods (1981 1989, 1990 1998, 1981 1998) examined. The mean Monday minus Tuesday to Friday return for NYSE stocks is also significantly higher than that for Amex and Nasdaq stocks during the 1990 1998 sub-period. These results provide additional evidence that the Monday seasonal may be related to the institutional holdings level in the stock market. B. Analyses Based on Institutional Portfolios Our evidence so far indicates that the Monday seasonal is stronger in the 1981 1989 sub-period than in the 1990 1998 sub-period. This coincides with the evidence that the percentage of institutional holdings is lower in the 1981 1989 period than in the 1990 1998 period. We also know that during the 1981 1998 period, the Monday seasonal is stronger in Amex and Nasdaq stocks than in NYSE stocks. This coincides with the evidence that the institutional holdings level of NYSE stocks is much higher than that of Amex and Nasdaq stocks. These two pieces of evidence indicate that the Monday seasonal and the level of institutional holdings may be correlated. To provide direct evidence on this issue, this section analyzes the impact of institutional holdings on Monday returns by partitioning stocks into portfolios sorted by the level of institutional holdings. For each year during the 1981 1998 period, we divide all NYSE, Amex and Nasdaq stocks in our sample into ten equal portfolios, according to the percentage of institutional holdings in each stock. Portfolio 1 is the portfolio with the lowest mean institutional holdings while portfolio 10 is the one with the highest mean institutional holdings. Table 3 reports the result. The institutional holdings level varies significantly among deciles. In the 1981 1998 period, the mean institutional holdings level is 0.2% for the lowest decile and 68.6% for the highest decile. We also observe that the institutional holdings level is a monotonically increasing function of time for nearly all deciles during the period examined.

TABLE 3 Institutional Holdings in Each Holdings Decile by Year and Specified Periods, 1981 1998 Year Portfolio 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 81 89 90 98 81 98 Lowest 0.000 0.000 0.000 0.000 0.000 0.001 0.001 0.001 0.001 0.001 0.001 0.002 0.003 0.003 0.003 0.004 0.004 0.004 0.001 0.003 0.002 Decile 2 0.003 0.002 0.005 0.005 0.007 0.011 0.012 0.011 0.011 0.010 0.011 0.014 0.018 0.018 0.022 0.027 0.026 0.027 0.008 0.020 0.015 Decile 3 0.013 0.012 0.020 0.020 0.027 0.036 0.037 0.033 0.034 0.033 0.035 0.043 0.052 0.052 0.060 0.072 0.072 0.075 0.027 0.057 0.044 Decile 4 0.031 0.031 0.046 0.046 0.057 0.071 0.072 0.067 0.070 0.068 0.074 0.086 0.101 0.101 0.112 0.127 0.130 0.136 0.057 0.107 0.085 Decile 5 0.057 0.060 0.081 0.082 0.097 0.115 0.117 0.112 0.118 0.119 0.125 0.142 0.161 0.163 0.176 0.190 0.195 0.210 0.096 0.168 0.137 Decile 6 0.093 0.097 0.130 0.128 0.150 0.174 0.171 0.164 0.179 0.184 0.191 0.214 0.232 0.236 0.250 0.271 0.276 0.296 0.147 0.243 0.202 Decile 7 0.150 0.156 0.193 0.188 0.216 0.243 0.239 0.229 0.251 0.260 0.274 0.300 0.321 0.328 0.345 0.368 0.377 0.400 0.212 0.336 0.283 Decile 8 0.233 0.237 0.277 0.269 0.302 0.326 0.329 0.324 0.348 0.358 0.381 0.405 0.426 0.441 0.457 0.477 0.495 0.522 0.299 0.446 0.383 Decile 9 0.350 0.347 0.393 0.383 0.413 0.438 0.446 0.445 0.469 0.489 0.511 0.536 0.554 0.571 0.590 0.607 0.624 0.647 0.415 0.576 0.507 Highest 0.537 0.537 0.570 0.571 0.592 0.615 0.624 0.632 0.658 0.671 0.696 0.718 0.736 0.745 0.763 0.781 0.797 0.812 0.598 0.752 0.686 Note. This table reports the mean percentage of institutional holdings of ten portfolios of NYSE, Amex, and Nasdaq stocks sorted by the percentage of institutional holdings in each year and in each specified period during the 1981 1998 period. The percentage of institutional holdings is defined as the number of shares held by institutional investors divided by the number of shares outstanding on June 30 of each year. Portfolio 1 (10) is the portfolio with the lowest (highest) mean institutional holdings. Period The Impact of Institutional Investors on the Monday Seasonal 975

976 Journal of Business Panel A of Table 4 reports the mean Monday returns of the ten portfolios sorted by the percentage of institutional holdings in each year and specified periods from 1981 to 1998. Two clear patterns can be observed from the table. First, the portfolio returns are, in general, more negative in the earlier years (when institutional holdings are lower) than in the later years (when institutional holdings are higher). Second, the portfolio returns are, in general, more negative in the lower decile portfolios (with lower institutional holdings) than in the higher decile portfolios (with higher institutional holdings). Except for portfolios 1, 3 and 4, the portfolio return is a monotonically increasing function of the level of institutional holdings in the 1981 1998 period. For the portfolio with the highest institutional holdings (portfolio 10), the mean Monday return is significantly negative in only one out of the 18 years examined. Not surprisingly, the mean Monday return ( 0.057%) of the portfolio with the highest institutional holdings in the 1981 1998 period is not significantly different from zero. Similarly, for the portfolio with the next highest institutional holdings (portfolio 9), only three out of the 18 years are with a significantly negative mean Monday return. A comparison of the results in the 1981 1989 sub-period with that in the 1990 1998 sub-period yields additional insight. The stock returns of every portfolio in the 1981 1989 period are lower than the corresponding portfolio in the 1990 1998 period. All the portfolio Monday returns are negative and significant in the 1981 1989 period. During the 1981 1989 period, except for the portfolios 1 and 7, the return is a monotonically increasing function of the level of institutional holdings. In contrast, only the returns of two portfolios (portfolios 5 and 6) are negative and significant in the 1990 1998 period. More interestingly, the two portfolios with the highest institutional holdings (portfolios 9 and 10) exhibit positive mean Monday returns during the 1990 1998 period. As a simple test to see if the portfolio Monday return is identical across deciles, we run regressions for each of the years and periods using the portfolio Monday return as the dependent variable and the percentage of institutional holdings in each holdings decile as the independent variable. We predict the coefficient of this variable to be significantly positive. Panel B of Table 4 reports the results. For the 18 years examined, 16 out of the 18 coefficients for the institutional holdings variable are positive. Out of these 16 coefficients, ten are significant. For the remaining two negative coefficients, only one is significant. When examining the relationship between the mean Monday return and the mean institutional holdings during the periods 1981 1989, 1990 1998 and 1981 1998, we find that all the three coefficients associated with the institutional holdings variable are positive and significant. This regression result seems to indicate that

The Impact of Institutional Investors on the Monday Seasonal 977 the mean Monday returns across institutional holdings deciles are not identical. 6 When the difference between the Monday return and the average Tuesday to Friday return is partitioned by institutional holdings level and by year, we find an interesting pattern. Panel A of Table 5 reports that the differences become insignificantly different from zero in recent years (1990 onwards) for portfolios with higher institutional holdings. For the 1990 1998 period, the difference between the Monday return and the average Tuesday to Friday return is not significant for the two portfolios (portfolios 9 and 10) with the highest institutional holdings level. This at least shows that, in recent years, the Monday return is not different from the mean Tuesday to Friday return for stocks with more institutional investors. Similar to Table 4, we also run regressions for each of the years and periods using the difference between the Monday return and the average Tuesday to Friday return as the dependent variable and the institutional holdings in each decile as the independent variable. Again, we predict the coefficient of this variable to be significantly positive. Panel B of Table 5 reports the result. For the 18 years examined, 16 of the coefficients associated with the institutional holdings variable are significantly positive. For the three periods examined (1981 1989, 1990 1998 and 1981 1998), all the three coefficients associated with the institutional holdings variable are also positive (two are significant). Our regression result suggests that the difference between the Monday return and the average Tuesday to Friday return is not identical across holdings deciles. This further shows that the Monday seasonal is typically stronger in stocks with low institutional holdings. A comparison of the result in Table 4 (based on Monday returns) with that in Table 5 (based on Monday minus Tuesday to Friday returns) yields an interesting observation. We observe in Table 4 that the effect of holdings is not very significant on a year-to-year basis after 1990, while in Table 5 the effect of holdings is always significantly positive. This is probably because, although the mean Monday returns are not significantly negative for most holdings deciles for the years during the bull market of 1990s, the Monday returns (at least for the lower holdings deciles) are still significantly lower than the returns on other weekdays during the period. This lower mean Monday minus Tuesday to Friday return may be the reason why the institutional holdings variable is more significant in explaining the Monday minus 6. We also conduct t-tests to see if the mean Monday returns are equal among institutional holdings deciles in the 1981 1998 period. When we divide all stocks into three institutional holdings portfolios, the difference in the Monday returns between the high holdings portfolio and low holdings portfolio is 0.068% (t-statistic = 2.29). When we divide all stocks into five institutional holdings portfolios, the difference in the Monday returns between the highest holdings portfolio and lowest holdings portfolio is 0.056% (t-statistic = 2.26). These results support the conclusions derived from the regression analyses.

TABLE 4 Impact of Institutional Holdings on Mean Monday Returns of Portfolios of NYSE, Amex, and Nasdaq Stocks, 1981 1998 Year 81 82 83 84 85 86 87 88 89 90 91 92 Panel A: Equally-Weighted Monday Returns (%) of Portfolios of NYSE, Amex, and Nasdaq Stocks Sorted by the Level of Institutional Holdings (T-Statistics in Parentheses) Portfolio Lowest.249.174.123.328.146.17.424.073.213.157.023.062 (3.48**) (2.61**) (1.33) (5.17**) (3.13**) (3.38**) (2.22**) (1.03) (3.07**) (2.86**) (.33) (.82) Decile 2.438.3.121.339.087.169.43.075.149.149.016.13 (3.99**) (2.73**) (.97) (4.80**) (1.56) (2.77**) (1.86*) (.80) (2.45**) (1.73*) (.22) (1.63) Decile 3.304.207.063.267.061.194.554.002.174.175.022.069 (2.72**) (1.97**) (.62) (4.26**) (1.14) (2.90**) (2.18**) (.02) (2.77**) (1.83*) (.21) (.84) Decile 4.256.107.047.277.068.217.486.028.215.185.104.022 (2.14**) (.87) (.47) (3.96**) (1.05) (2.91**) (1.77*) (.25) (3.16**) (1.54) (.81) (.27) Decile 5.22.146.088.271.013.184.531.044.241.242.042.014 (2.08**) (1.22) (.83) (3.49**) (.20) (2.55**) (1.75*) (.41) (3.48**) (2.18**) (.39) (.16) Decile 6.235.116.079.215.035.238.546.009.147.218.00.006 (2.16**) (1.01) (.73) (2.58**) (.56) (3.02**) (1.84*) (.09) (2.35**) (1.75*) (.00) (.07) Decile 7.204.097.068.212.009.197.459.004.198.213.028.001 (1.89*) (.74) (.62) (2.53**) (.13) (2.56**) (1.57) (.04) (3.06**) (1.60) (.24) (.01) Decile 8.187.167.093.175.001.212.532.057.144.103.062.055 (1.54) (1.23) (.81) (2.02**) (.01) (2.25**) (1.65*) (.61) (2.21**) (.74) (.48) (.69) Decile 9.185.084.068.223.004.23.547.033.135.026.082.055 (1.51) (.54) (.58) (2.32**) (.04) (2.25**) (1.50) (.30) (1.90*) (.16) (.59) (.63) Highest.119.045.064.168.016.169.6.04.07.007.029.084 (.96) (.28) (.57) (1.69*) (.17) (1.47) (1.45) (.33) (.84) (.04) (.19) (.87) Panel B: Regression Estimates Obtained by Regressing the Mean Monday Return of Each Portfolio on the Institutional Holdings Level in Each Decile (T-Statistics in Parentheses) Intercept.292.185.090.290.078.194.472.033.205.209.028.050 (10.20**) (7.42**) (7.49**) (20.78**) (4.86**) (18.24**) (21.98**) (2.05*) (12.90**) (9.70**) (1.70) (2.47 **) Holdings.355.277.049.253.198.018.191.157.171.286.041.000 (4.18**) (3.94**) (1.57) (5.01**) (4.09**) (.37) (3.85**) (3.35**) (4.31**) (5.36**) (.92) (.00) Adjusted R2.49.39.03.62.56.10.39.43.51.57.04.12 Number of Observations 10 10 10 10 10 10 10 10 10 10 10 10 978 Journal of Business Period

TABLE 4 Impact of Institutional Holdings on Mean Monday Returns of Portfolios of NYSE, Amex, and Nasdaq Stocks, 1981 1998 Year 92 93 94 95 96 97 98 81 89 90 98 81 98 Panel A: Equally-Weighted Monday Returns (%) of Portfolios of NYSE, Amex, and Nasdaq Stocks Sorted by the Level of Institutional Holdings (T-Statistics in Parentheses) Portfolio Lowest.062.08.08.088.011.086.157.212.027.119 (.82) (1.10) (.97) (1.00) (.14) (.95) (1.24) (7.00**) (.95) (5.71**) Decile 2.13.069.178.013.059.052.162.236.047.141 (1.63) (.84) (2.35**) (.22) (.79) (.53) (1.28) (6.13**) (1.64) (5.83**) Decile 3.069.132.063.039.036.032.212.205.037.121 (.84) (1.85*) (.84) (.55) (.41) (.24) (1.29) (5.14**) (1.08) (4.58**) Decile 4.022.049.124.058.046.018.215.191.052.121 (.27) (.71) (1.61) (.81) (.54) (.14) (1.21) (4.45**) (1.40) (4.27**) Decile 5.014.001.14.031.006.003.3.185.065.125 (.16) (.02) (1.71*) (.41) (.06) (.02) (1.63) (4.09**) (1.76*) (4.27**) Decile 6.006.015.083.011.03.003.243.181.066.124 (.07) (.22) (1.04) (.14) (.34) (.02) (1.29) (4.10**) (1.74*) (4.23**) Decile 7.001.02.096.042.002.046.234.161.045.103 (.01) (.29) (1.18) (.53) (.02) (.31) (1.24) (3.60**) (1.16) (3.47**) Decile 8.055.02.079.013.025.073.209.163.015.089 (.69) (.27) (.92) (.15) (.27) (.45) (1.07) (3.37**) (.37) (2.81**) Decile 9.055.082.06.071.044.103.147.162.023.069 (.63) (1.04) (.72) (.84) (.42) (.62) (.74) (3.01**) (.53) (2.00**) Highest.084.114.03.014.024.061.132.133.019.057 (.87) (1.36) (.34) (.14) (.23) (.35) (.62) (2.24**) (.42) (1.50) Period The Impact of Institutional Investors on the Monday Seasonal Panel B: Regression Estimates Obtained by Regressing the Mean Monday Return of Each Portfolio on the Institutional Holdings Level in Each Decile (T-Statistics in Parentheses) Intercept.050.050.123.001.039.052.219.208.057.133 (2.47 **) (2.25*) (6.19 **) (.02) (3.71**) (4.76**) (8.76**) (33.12**) (5.43**) (32.15**) Holdings.000.020.111.048.105.203.057.135.094.112 (.00) (.33) (2.83**) (.86) (4.11**) (4.64**) (1.09) (5.68**) (3.27**) (8.65**) Adjusted R2.12.11.34.04.61.80.02.78.52.89 Number of Observations 10 10 10 10 10 10 10 10 10 10 Note. Panel A of this table reports the equally-weighted Monday returns (%) of ten portfolios of NYSE, Amex, and Nasdaq stocks sorted by the percentage of institutional holdings in each year and in each specified period during the 1981 1998 period. For each year or specified period, we divide all NYSE, Amex, and Nasdaq stocks in our sample into ten equal portfolios based on the percentage of institutional holdings of each stock. ( The percentage of institutional holdings is defined as the number of shares held by institutional investors divided by the number of shares outstanding on June 30 of each year.) Portfolio 1 (10) is the portfolio with the lowest (highest) mean institutional holding. The mean portfolio return reported in the table is the average of the mean Monday returns of all the securities that comprise the portfolio in a particular year or period. Panel B reports the regression results where the mean Monday returns of each portfolio are regressed on the percentage of institutional holdings of each holdings decile. *, ** Significant at the 10% and 5% levels, respectively, for a two-tailed test (t-statistics). 979

TABLE 5 Difference between Monday Returns and Mean Tuesday to Friday Returns of Portfolios of NYSE, Amex, and Nasdaq Stocks, 1981 1998 Year 81 82 83 84 85 86 87 88 89 90 91 92 Panel A: Difference (%) between Monday Returns and Mean Tuesday to Friday Returns of Portfolios of NYSE, Amex, and Nasdaq Stocks Sorted by the Level of Institutional Holdings (T Statistics in Parentheses) Portfolio All combined.309.287.257.259.178.306.648.132.299.145.241.165.1 (2.65**) (2.23**) (2.29**) (3.12**) (2.63**) (3.83**) (2.14**) (1.31) (4.57**) (1.18) (2.16**) (2.10**) (1.9 Lowest.260.189.282.274.176.172.451.129.278.121.174.292.2 (3.16*) (2.51*) (2.77*) (3.92*) (3.13*) (2.93*) (2.27*) (1.70**) (3.80*) (1.94**) (2.24*) (3.45*) (3.1 Decile 2.468.447.323.292.188.288.57.224.281.187.32.192.2 (3.78*) (3.62*) (2.41*) (3.73*) (2.95*) (4.21*) (2.35*) (2.28*) (4.27*) (2.02*) (3.94*) (2.18*) (3.0 Decile 3.375.338.244.269.214.313.711.163.328.215.406.284.1 (3.07*) (2.94*) (2.24*) (3.84*) (3.51*) (4.21*) (2.67*) (1.48*) (4.79*) (2.07*) (3.71*) (3.08*) (1.8 Decile 4.335.263.233.294.229.342.611.181.376.272.336.306.1 (2.57*) (2.00*) (2.16*) (3.77*) (3.27*) (4.13*) (2.13*) (1.57) (5.01*) (2.11*) (2.47*) (3.40*) (2.1 Decile 5.313.316.264.287.176.303.659.104.402.252.280.191.1 (2.70*) (2.43*) (2.32*) (3.35*) (2.59*) (3.79*) (2.08*) (.92) (5.35*) (2.11*) (2.41*) (2.10*) (2.2 Decile 6.317.285.262.249.175.339.676.149.277.229.260.181.1 (2.66*) (2.28*) (2.26*) (2.76*) (2.59*) (3.87*) (2.19*) (1.49) (3.95*) (1.71**) (2.03*) (1.99*) (2.1 Decile 7.292.264.246.230.165.297.562.144.328.183.217.151.1 (2.46*) (1.89**) (2.10*) (2.49*) (2.15*) (3.47*) (1.85**) (1.24) (4.59*) (1.29) (1.70**) (1.69**) (1.6 Decile 8.287.321.260.210.169.327.668.072.271.073.148.049.0 (2.18*) (2.18*) (2.11*) (2.20*) (2.11*) (3.17*) (2.00*) (.71) (3.66*) (.50) (1.08) (.55) (.9 Decile 9.266.232.228.278.152.345.712.094.259.017.123.032.0 (2.01*) (1.39) (1.80**) (2.60*) (1.65**) (3.06*) (1.90**) (.78) (3.18*).10 (.82) (.32) (.1 Highest.184.203.225.212.126.297.807.065.198.050.157.011.0 (1.39) (1.17) (1.81**) (1.86**) (1.23) (2.35*) (1.90**) (.50) (2.10*).27 (.97).10 Panel B: Regression Estimates Obtained by Regressing the Difference between the Monday Returns and Mean Tuesday to Friday Returns of Each Portfolio on the Institutional Holdings Level in Each Decile (T-Statistics in Parentheses) Intercept.355.315.273.279.199.285.574.169.337.237.308.273.2 (13.35**) (9.38**) (22.01**) (43.68**) (22.42**) (10.69**) (15.53**) (10.53**) (14.66**) (7.73**) (8.53**) (12.64**) (1 Holdings.307.197.093.113.120.085.337.183.174.414.285.433.3 (3.93**) (1.99*) (2.76**) (3.36**) (5.62**) (1.06) (3.72**) (4.50**) (3.28**) (5.73**) (3.07**) (8.52**) (9 Adj. R-sq..47.12.28.36.62.01.43.53.33.66.45.85.8 Number of Observations 10 10 10 10 10 10 10 10 10 10 10 10 10 980 Journal of Business

TABLE 5 (Continued) Year Period 92 93 94 95 96 97 98 81 89 90 98 81 98 Panel A: Difference (%) between Monday Returns and Mean Tuesday to Friday Returns of Portfolios of NYSE, Amex, and Nasdaq Stocks Sorted by the Level of Institutional Holdings (T Statistics in Parentheses) Portfolio All combined.165.132.177.184.151.136.307.299.182.240 (2.10**) (1.93*) (2.19**) (2.46**) (1.60) (.97) (1.66*) (6.51**) (4.86**) (8.09**) Lowest.292.246.313.258.256.344.422.247.270.258 (3.45*) (3.15*) (3.54*) (2.78*) (2.93*) (3.56*) (3.06*) (7.57*) (8.81*) (11.40*) Decile 2.192.266.326.28.241.242.289.344.26.302 (2.18*) (3.03*) (3.98*) (4.33*) (2.88*) (2.34*) (2.11*) (8.31*) (8.33*) (11.56*) Decile 3.284.147.189.268.196.199.34.33.249.29 (3.08*) (1.89**) (2.27*) (3.57*) (2.04*) (1.46) (1.93**) (7.78*) (6.77*) (10.26*) Decile 4.306.164.202.285.176.156.318.321.246.283 (3.40*) (2.16*) (2.38*) (3.72*) (1.86**) (1.11) (1.67**) (7.02*) (6.18*) (9.33*) Decile 5.191.164.205.152.123.125.399.315.209.262 (2.10*) (2.20*) (2.30*) (1.89**) (1.12) (.87) (2.03*) (6.61*) (5.27*) (8.43*) Decile 6.181.161.146.195.166.126.323.305.198.252 (1.99*) (2.13*) (1.65**) (2.44*) (1.70**) (.83) (1.60) (6.52*) (4.85*) (8.09*) Decile 7.151.121.138.111.119.064.292.282.155.219 (1.69**) (1.64) (1.54) (1.32) (1.21) (.42) (1.44) (5.95*) (3.74*) (6.93*) Decile 8.049.075.117.126.087.039.280.289.110.199 (.55) (.92) (1.24) (1.41) (.83) (.23) (1.33) (5.63*) (2.51*) (5.90*) Decile 9.032.012.088.059.045.010.217.287.063.174 (.32) (.14) (.95) (.66) (.39) (.06) (1.01) (5.06*) (1.35) (4.75*) Highest.011.022.063.124.103.061.200.260.069.165.10.23 (.63) (1.19) (.88) (.34) (.88) (4.15*) (1.39) (4.11*) The Impact of Institutional Investors on the Monday Seasonal Panel B: Regression Estimates Obtained by Regressing the Difference between the Monday Returns and Mean Tuesday to Friday Returns of Each Portfolio on the Institutional Holdings Level in Each Decile (T-Statistics in Parentheses) Intercept.273.225.260.261.216.233.372.313.265.288 (12.64**) (13.06**) (11.00**) (14.50**) (13.08**) (7.60**) (15.06**) (25.15**) (31.42**) (38.10**) Holdings.433.352.308.269.221.322.204.080.305.201 (8.52**) (9.68**) (5.85**) (4.14**) (3.87**) (3.78**) (4.67**) (1.70) (13.07**) (8.52**) Adj. R-sq..85.88.76.67.70.67.61.17.95.89 Number of Observations 10 10 10 10 10 10 10 10 10 10 Note. Panel A of this table reports the difference (%) between the equally-weighted Monday returns and the average Tuesday to Friday returns of ten portfolios of NYSE, Amex, and Nasdaq stocks sorted by the percentage of institutional holdings in each year and in each specified period during the 1981 1998 period. For each year or specified period, we divide all NYSE, Amex, and Nasdaq stocks in our sample into ten equal portfolios based on the percentage of institutional holdings of each stock. (The percentage of institutional holdings is defined as the number of shares held by institutional investors divided by the number of shares outstanding on June 30 of each year.) Portfolio 1 (10) is the portfolio with the lowest (highest) mean institutional holding. The portfolio return reported in the table is the average of the difference between the mean Monday returns and the mean Tuesday to Friday returns of all the securities that comprise the portfolio in a particular year or period. Panel B reports the regression results where the difference in returns of each portfolio is regressed on the percentage of institutional holdings of each holdings decile. *, ** Significant at the 10% and 5% levels, respectively, for a two-tailed test (t-statistics). 981

982 Journal of Business TABLE 6 Dependent Variable Regression Analysis of the Effect of Institutional Holdings on Monday Returns and Monday minus Tuesday to Friday Returns for the 1981 1989 and 1990 1998 Sub-Periods Regression 1 Monday Return Regression 2 Monday minus Tuesday to Friday Return Intercept 0.208 0.313 (25.35**) (30.03**) Percentage Holdings 0.135 0.080 (4.35**) (2.03*) Dummy 90 98 0.151 0.047 (12.58**) (3.11**) Percentage Holdings * Dummy 90 98 0.041 0.225 (1.03) (4.50**) Adjusted R-square 0.95 0.92 Number of Observations 20 20 Note. Regression 1 uses the average Monday returns of the ten portfolios sorted by institutional holdings during the 1981 1989 sub-period and the average Monday returns of the ten portfolios sorted by institutional holdings level during the 1990 1998 sub-period as the dependent variable. Regression 2 uses the 20 average Monday minus Tuesday to Friday portfolio returns sorted by institutional holdings level during the 1981 1989 and the 1990 1998 sub-periods as the dependent variable. Percentage Holdings is the average percentage of institutional holdings of each portfolio sorted by holdings level during the two sub-periods. Dummy 90 98 takes a value of 1 for the ten portfolio returns during the 1990 1998 period. Percentage holdings * Dummy 90 98 is an interaction variable. *, ** Significant at the 10% and 5% levels, respectively, for a two-tailed test (t-statistics). Tuesday to Friday return than in explaining the Monday return during the 1990 1998 period. 7 We also conduct two regressions to see if the effect of institutional holdings is the same for the 1981 1989 and 1990 1998 sub-periods. In regression 1, we regress the 20 mean Monday returns (for the decile portfolios in the 1981 1989 period and the decile portfolios in the 1990 1998 period) against three independent variables: dummy for 1990 1998, percentage of institutional holdings in each decile, and an interaction variable (dummy for 1990 1998 * percentage holdings). Regression 2 estimates the same equation, with the exception that we use the mean Monday minus Tuesday to Friday return as the dependent variable. We expect the coefficient of the institutional holdings variable to be significantly positive. Table 6 reports the result. As expected, the coefficients for the percentage of institutional holdings are significantly positive in both regressions. When the Monday return is used as the dependent variable, the interaction term is not significant indicating that the percentage of institutional holdings does not have a different effect in the two sub-periods. However, when Monday minus Tuesday to Friday return is used as the dependent variable, we find that the effect of institutional holdings is stronger in the 1990 1998 sub-period than in the 1981 1989 sub-period. (The 7. We thank an anonymous referee for pointing out this observation.

The Impact of Institutional Investors on the Monday Seasonal 983 coefficient of the interaction term in regression 2 is positive and significant.) This probably explains why the mean Monday minus Tuesday to Friday returns of larger holdings deciles (deciles 7 to 10) are mostly not significantly different from zero for the years in the 1990 1998 subperiod, but are mostly negative and significant during the years in the 1981 1989 sub-period. However, the fact that the dummy for the 1990 1998 period is also significantly positive in both regressions indicates that during the period there are forces other than institutional holdings affecting the magnitude of the Monday seasonal as well. C. Additional Tests Abraham and Ikenberry (1994) and Sias and Starks (1995) find that firm size may also influence the magnitude of the Monday return. In addition, Wang, Li, and Erickson (1997) report that the mean Monday return is more negative in the last two weeks of the month. The literature also indicates that the Monday seasonal is highly correlated with the previous Friday s return. To further test the impact of institutional holdings on Monday returns while controlling for these factors, we run two separate sets of regressions. The first set of regressions tests the impact of institutional holdings on the Monday return of individual stocks by year and by specified period over the 1981 1998 period while controlling for firm size and the type of stock market. (The dependent variable is the Monday return of individual stocks and the independent variables are the percentage of institutional holdings of the stock, the logarithm of the stock s market capitalization, and two dummies representing different stock markets). The second set of regressions analyzes the relation between institutional holdings and the Monday returns of individual stocks for size-sorted portfolios over the 1981 1998 period while accounting for the previous trading day return, the last two Mondays effect, and the type of stock market. Overall, our conclusions regarding the effects of institutional holdings on the Monday return do not seem to be affected when we control for these additional variables. V. Conclusions The Monday seasonal has been one of the most puzzling phenomena in the finance literature. Our paper reports several interesting findings related to this phenomenon. We first document that the mean Monday return is not significantly negative if we consider only stock return data from 1990 to 1998. There are two possible explanations for this observation. First, the bull market of the 1990s could have resulted in a less negative mean Monday return during the period. Second,

984 Journal of Business because more institutional investors participate in the stock market during the 1990 1998 period than in the pre-1990 period, the decline in the magnitude of the Monday return after 1990 may be linked to the increased role of institutional investors in the equity markets. We further explore the relationship between institutional investors and the Monday seasonal, finding that the Monday seasonal is weaker for stock portfolios with high institutional holdings than those with low institutional holdings. More importantly, we find that the mean Monday returns of stock portfolios with high institutional holdings are positive during the 1990 1998 period and most of these returns are not significantly different from the corresponding mean Tuesday to Friday returns during the same period. Our paper provides direct evidence that the well-known Monday seasonal is typically stronger in stocks with low institutional holdings. Lakonishok and Maberly (1990) document that individual investors tend to increase trading activity (especially sell transactions) on Monday. This evidence indicates that the Monday seasonal could be related to the trading pattern of individual investors. Our result supports Lakonishok and Maberly s (1990) findings. Our finding also suggests that an active participation of institutional investors in a stock market may reduce the magnitude of the Monday seasonal. This is true because institutional investors may be able to actively arbitrage the seasonal given that they should be more aware of the Monday seasonal and have lower trading costs than most individuals. Appendix Our data collection process begins with the Spectrum tapes. From these tapes, we obtain the following information: CUSIP, stock name, end-of-quarter shares outstanding, and shares held by institutional investors. However, because the Spectrum file reports the number of shares outstanding figure rounded to the nearest one million, some of the percentages exceed 100 percent when the percentage of shares held by institutional investors is calculated. To solve this problem, we use shares outstanding data from CRSP tapes. We first identify firms that are listed by both the CRSP and Spectrum tapes and then use the 8-digit CUSIP number from the CRSP tapes as the key to merge information from the two tapes. This process results in a file that contains the permanent number (from CRSP), the number of shares held by each institutional investor (from Spectrum), the number of shares outstanding at the end of each quarter (from CRSP), and stock returns data (from CRSP) during the 1981 1998 period. For each firm the percentage of institutional holdings in each quarter is computed as the number of shares held by institutional investors divided by the number of shares outstanding in that quarter. We use the data reported for 1984 as an example to discuss the data collection process. In 1984, there are 5,266 firms in the Spectrum tapes that have information on the number of shares held by institutional investors. Of these firms, 158 cannot be matched (using the 8-digit CUSIP number) with any firm in the CRSP tapes

The Impact of Institutional Investors on the Monday Seasonal 985 during the same quarter. (The majority of these firms are foreign firms.) Since we do not have return data for these 158 firms, we delete them from the sample. After eliminating these firms, the resulting number of Spectrum firms that can be completely matched with CRSP firms in the same quarter using the 8-digit CUSIP number is 5,108. From these 5,108 firms we exclude 8 observations where the computed percentage of institutional share holdings exceeds 100 percent and another 50 observations with no CRSP shares outstanding data for the quarter. (In the latter case, Spectrum reports the share holdings information on the firm at least a quarter earlier than when CRSP begins to report shares outstanding data for the firm. This is likely in situations where firms go public using the best-efforts method.) After going through the above-mentioned procedures, the resulting number of useful observations is 5,050. We then match firms listed in CRSP tapes with firms listed in Spectrum in the 1981 1998 period. In the second quarter of 1984, we find 6,335 observations in the CRSP tapes with shares outstanding data along with stock return data during the quarter. Among these 6,335 firms, 381 cannot be matched (using the 8-digit CUSIP number) with firms listed in Spectrum during any quarter in the period 1981 1998. In other words, during the 1981 1998 period none of the 13(f ) institutions hold the stocks of these firms. Hence these firms are assigned a zero percentage of institutional holdings for the purpose of analysis. 5,954 firms listed in the CRSP tapes in the second quarter of 1984 can be matched using the 8-digit CUSIP with firms listed in the Spectrum in one of the quarters during the 1981 1998 period. From these 5,954 firms we exclude 8 firms (similar to the 8 firms in the Spectrum tapes) that have a computed percentage of institutional holdings in excess of 100 percent. After we exclude these 8 firms we have 5,946 completely matched CRSP firms. Of these 5,946 firms, 5,050 are matched with Spectrum firms in the same quarter and 896 are matched with Spectrum firms in a quarter other than the current quarter. Since we are not certain about the institutional holdings information in the current quarter for the 896 firms, we delete these firms from the sample. This process gives us a total of 5,431 observations. Of these, 5,050 observations have a positive percentage of institutional holdings and 381 observations have zero institutional holdings (these are firms that cannot be matched with firms listed in Spectrum during any quarter in the 1981 1998 period). References Abraham, A., and Ikenberry, D. L. 1994. The individual investor and the weekend effect. Journal of Financial and Quantitative Analysis 29: 263 277. Badrinath, S. G.; Kale, J.; and Noe, T. 1995. Of shepherds, sheep and the cross-autocorrelation in equity returns. Review of Financial Studies 2: 401 430. Barclay, M.; Christie, W.; Harris, J.; Kandel, E.; and Schultz, P. 1999. The effects of market reform on the trading costs and depths of Nasdaq stocks. Journal of Finance 54: 1 34. Bessembinder, H. 1999. Trade execution costs on NASDAQ and NYSE: A post-reform comparison. Journal of Financial and Quantitative Analysis 34: 387 407. Chan, L. K. C., and Lakonishok, J. 1993. Institutional trades and intraday stock price behavior. Journal of Financial Economics 33: 173 199. Chan, L. K. C., and Lakonishok, J. 1995. The behavior of stock prices around institutional trades. Journal of Finance 50: 1147 1174. Chan, L. K. C., and Lakonishok, J. 1997. Institutional equity trading costs: NYSE versus Nasdaq. Journal of Finance 52: 713 735.