Quarterly Trading Patterns of Financial Institutions

This paper investigates whether different types of institutions have discernible trading motives in response to portfolio disclosures. Results show that banks, life insurance companies, mutual funds, and investment advisors who act as external managers generally have similar trading strategies. They sell more poorly performing stocks during the fourth quarter than the first three quarters of the year, and such trading behavior is more pronounced for institutions whose stocks on average have underperformed the market. In contrast, property and liability insurance companies, internally-managed pension funds, colleges, universities, and foundations, who mainly provide their own asset management services, show less inclination to window dress their portfolios