Institutional Ownership and the Dynamics of Trading Volume around FFO Announcements

We examine the effect of institutional ownership on abnormal trading volume around the announcement of funds from operations (FFO) by real estate investment trusts (REITs). Our central thesis is that abnormal trading volume is lower for the more informed institutions vis a vis non-sophisticated retail investors/institutions. We find a negative relationship between ownership by pension funds and abnormal trading volume around quarterly FFO announcements. However, ownership by the other types of institutions is unrelated to abnormal trading volume. Consistent with the view that some institutional investors are more informed than individual investors and therefore respond less to end of year announcements, we find that higher ownership by investment advisors is associated with lower levels of trading volume around end of year FFO announcements. Lastly, we find no evidence of institutional sell-offs associated with announcements of less than expected FFO.