The Trading Behaviour of UK Institutional Investors

In this paper we analyze the trading patterns of a large number of institutional investors in the UK. We expect these investors to time their trades and the buy (sell) trades to lead to positive (negative) post-event returns. On average, share prices increase significantly on the announcement of both large buy and sell orders and before the sell orders, suggesting that institutional investors take advantage of the run-up in share prices before they sell their holdings. However, we document significant differences across different institutional investors in terms of the timing of the trades with insurance companies, fund managers and overseas investors following contrarian strategies while pension funds and banks follow momentum strategies. However, such strategies do not necessarily lead to positive returns in the post-event period