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Aalto University School of Business Master's Theses are now in the Aaltodoc publication archive (Aalto University institutional repository)
School of Business | Department of Finance | Finance | 2016
Thesis number: 14675
Who are the smart investors and how do they trade - evidence from institutions' trades
Author: Kilpinen, Samu
Title: Who are the smart investors and how do they trade - evidence from institutions' trades
Year: 2016  Language: eng
Department: Department of Finance
Academic subject: Finance
Index terms: sijoittajat; investors; tulos; return; instituutiot; institutions
Pages: 62
Key terms: institutions; Ancerno; trading behavior; anomalies; alpha
Understanding who the smart investors are and how they achieve their returns has been an intriguing question to academics and practitioners alike. Having access to smart investors' trades would open perspectives on how the markets work, and what are driving their returns.

For understandable reasons such trade-level access has been rare especially for data on institutional trading. This paper aims to fill a gap in the existing literature by analyzing the institutions' trading behavior using the Ancerno data that provides trade-level visibility on institutions' trades.

This thesis contributes to the existing literature in three key ways. Firstly, it is shown how good performance tends to be persistent for institutions. Secondly, the paper provides evidence that nearly all institutions tend to trade at least some anomalies. Lastly, a link between investor sophistication and the ability to predict market movements is established. Granger causality is used to find that smart institutions also tend to lead their less sophisticated peers in e.g. factor exposures more than vice versa.
Master's theses are stored at Learning Centre in Otaniemi.