Institutional holding, idiosyncratic volatility and information flow

This paper investigates the effect of institutional holding on idiosyncratic volatility and information flow. We document that firms with larger pretrade institutional ownership have more access to firm-specific information, which leads to larger idiosyncratic volatility. Institutional trading, with Fund as an exception, has no effect on idiosyncratic volatility and private information. Generally, institutional trading accelerates the incorporation of current and future earnings information into stock price.