Summary

Traditional asset pricing models rely on individuals making joint investment and consumption decisions. However, in reality the majority of assets is owned by large institutional investors, such as pension funds, sovereign wealth funds and insurance companies. While the investment behavior of these institutions, to some extent, reflects the preferences of individual end investors, there are some key differences. For example, institutional investors heavily rely on benchmarking, many follow passive investment strategies, and they increasingly invest in private and alternative assets and in factor-based strategies. Because of their size, institutional investors can affect asset prices with their asset allocation decisions. My research aims to examine this question empirically, for both public and private markets.

In the first part of this research program, I investigate the impact of the decline in the number of listed companies on popular factor-based investment strategies. In the second part, I investigate the impact of institutional investors trading behaviour on return comovements within and between asset classes and diversification potential. With this research agenda, I aim to contribute to the academic understanding of financial markets as well as deliver new insights to the investment industry.