Heterogeneous Beliefs, Institutional Investors and Stock Returns – Evidence from China
Yan Liu 1 2 *
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1 School of Economics and Management, Southwest Jiaotong University, Chengdu, Sichuan 610031, CHINA2 School of Economics and Finance, Chongqing University of Technology, Banan District, Chongqing 400054, CHINA* Corresponding Author

This article belongs to the special issue "Problems of Application Analysis in Knowledge Management and Science-Mathematics-Education".


Using the turnover decomposition model, I extract unexpected trading volume from the institutional investors’ trading activity to measure the institutional investors’ heterogeneous beliefs and explore the explanatory power of that on stock returns. Portfolios built according to the magnitude of institutional investors’ heterogeneous beliefs are significantly profitable. The expected returns of portfolios with higher heterogeneous beliefs are significantly higher than other portfolios, particularly for small companies, and the influence of institutional investors’ heterogeneous beliefs on stock returns during the current month is significantly positive, but it is significantly negative for the next month. When considering beta, bm, size and short-sales constraints, the conclusion is still valid.


This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Article Type: Research Article

EURASIA J Math Sci Tech Ed, 2017, Volume 13, Issue 12, 7783-7790


Publication date: 21 Nov 2017

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