This paper examines the impact of institutional trading on stock prices using data on the quarterly portfolio holdings of 769 all-equity pension funds between 1985 and 1989. The authors investigate two aspects of institutional trading: herding, which refers to buying or selling the same stocks as other managers, and positive-feedback trading, which refers to buying winners and selling losers. They find no substantial evidence of herding or positive-feedback trading by pension fund managers at the level of individual stocks, except in small stocks. There is also no strong cross-sectional correlation between changes in pension funds' holdings of a stock and its abnormal return. The paper also explores the potential destabilizing effect of institutional investors on stock prices. It argues that while herding and positive-feedback trading are often cited as reasons for instability, the evidence suggests that institutional investors do not necessarily destabilize stock prices. The authors find that institutional investors follow a broad range of trading styles and strategies, and their trades tend to offset each other without having a large impact on prices. They conclude that there is no solid evidence in their data that institutional investors destabilize prices of individual stocks. Instead, the emerging image is that institutions follow a broad range of styles and strategies, and their trades offset each other without having a large impact on prices. The authors also note that their results do not preclude market-wide herding, such as would occur if money managers followed each other in market timing strategies, or herding in individual stocks at higher-than-quarterly frequencies.This paper examines the impact of institutional trading on stock prices using data on the quarterly portfolio holdings of 769 all-equity pension funds between 1985 and 1989. The authors investigate two aspects of institutional trading: herding, which refers to buying or selling the same stocks as other managers, and positive-feedback trading, which refers to buying winners and selling losers. They find no substantial evidence of herding or positive-feedback trading by pension fund managers at the level of individual stocks, except in small stocks. There is also no strong cross-sectional correlation between changes in pension funds' holdings of a stock and its abnormal return. The paper also explores the potential destabilizing effect of institutional investors on stock prices. It argues that while herding and positive-feedback trading are often cited as reasons for instability, the evidence suggests that institutional investors do not necessarily destabilize stock prices. The authors find that institutional investors follow a broad range of trading styles and strategies, and their trades tend to offset each other without having a large impact on prices. They conclude that there is no solid evidence in their data that institutional investors destabilize prices of individual stocks. Instead, the emerging image is that institutions follow a broad range of styles and strategies, and their trades offset each other without having a large impact on prices. The authors also note that their results do not preclude market-wide herding, such as would occur if money managers followed each other in market timing strategies, or herding in individual stocks at higher-than-quarterly frequencies.