Liquidity characteristics of market anomalies and institutional trading

• 成果类型: Article
• 署名作者: Cao, Charles; Liang, Bing; Yao, Tong; Zhang, Andrew
• 署名单位: Chinese University of Hong Kong; Tsinghua University; University of Massachusetts System; University of Massachusetts Amherst; University of Iowa; Nevada System of Higher Education (NSHE); University of Nevada Las Vegas
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2026.104254
• 发表日期: 2026-05
• 页码: 104254
• 关键词: liquidity; Institutional trading; anomalies; Long/short legs; cross-section; stock returns; investor sophistication; illiquidity; INFORMATION; news; arbitrage; momentum; LIMITS; COSTS

摘要

We find that market anomalies exhibit heterogeneous liquidity characteristics - long-short portfolios based on long-horizon (short-horizon) anomalies have liquidity-provision (liquidity-demanding) characteristics. Consistent with such liquidity characteristics, institutional investors tend to trade in the wrong (right) direction of long-horizon (short-horizon) anomalies. Further analysis shows that exogenous liquidity factors and institutional liquidity preferences have causal effects on the observed institutional trading patterns. Finally, despite the perception that liquidity improves market efficiency, we find that liquidity can exacerbate the magnitude of anomalies through its influence on institutional trading.