Institutional Holding Periods; Our results are consistent with the agency problem that arises when clients cannot distinguish when a manager is “actively doing nothing” versus “simply doing nothing” as well as managers having overconfidence in their own short-term trading ability

March 1, 2013 Leave a comment

Institutional Holding Periods

Bidisha Chakrabarty 

Saint Louis University – John Cook School of Business

Pamela C. Moulton 

Cornell University

Charles Trzcinka 

Indiana University Bloomington – Department of Finance
February 20, 2013

Abstract: 
We find wide dispersion in trade holding periods for institutional money managers and pension funds, using a large database of fund-level transactions. All of the institutional funds execute round-trip trades lasting over a year; 96% of them also execute trades lasting less than one month, although short-duration trades have negative returns on average. We find only limited evidence that institutions choose trade holding periods based on portfolio optimization and no evidence that short-duration institutional trades are driven by the disposition effect. Our results are consistent with the agency problem that arises when clients cannot distinguish when a manager is “actively doing nothing” versus “simply doing nothing” as well as managers having overconfidence in their own short-term trading ability.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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