The paper by Lakonishok, Shleifer, and Vishny examines the impact of institutional trading on stock prices, focusing on two key aspects: herding and positive-feedback trading. Herding refers to the tendency of institutional investors to buy or sell the same stocks simultaneously, while positive-feedback trading involves buying winners and selling losers. The study uses data from 769 all-equity pension funds managed by 341 different institutional money managers between 1985 and 1989. Key findings include: - **Herding**: There is virtually no evidence of significant herding in large stocks, where most institutional trading occurs. Some herding is observed in smaller stocks, but it is not dramatic. - **Positive-Feedback Trading**: There is some evidence of positive-feedback trading in smaller stocks, but not in large stocks. - **Correlation Between Institutional Demand and Prices**: The correlation between institutional excess demand and contemporaneous stock price changes is extremely weak, suggesting that large swings in institutional demand do not drive price movements. The authors conclude that institutional investors do not destabilize stock prices through herding or positive-feedback trading. Instead, they follow a diverse range of trading styles, and their trades largely offset each other, having a minimal impact on prices. However, the study acknowledges limitations, such as the inability to detect market-wide herding or herding at higher frequencies.The paper by Lakonishok, Shleifer, and Vishny examines the impact of institutional trading on stock prices, focusing on two key aspects: herding and positive-feedback trading. Herding refers to the tendency of institutional investors to buy or sell the same stocks simultaneously, while positive-feedback trading involves buying winners and selling losers. The study uses data from 769 all-equity pension funds managed by 341 different institutional money managers between 1985 and 1989. Key findings include: - **Herding**: There is virtually no evidence of significant herding in large stocks, where most institutional trading occurs. Some herding is observed in smaller stocks, but it is not dramatic. - **Positive-Feedback Trading**: There is some evidence of positive-feedback trading in smaller stocks, but not in large stocks. - **Correlation Between Institutional Demand and Prices**: The correlation between institutional excess demand and contemporaneous stock price changes is extremely weak, suggesting that large swings in institutional demand do not drive price movements. The authors conclude that institutional investors do not destabilize stock prices through herding or positive-feedback trading. Instead, they follow a diverse range of trading styles, and their trades largely offset each other, having a minimal impact on prices. However, the study acknowledges limitations, such as the inability to detect market-wide herding or herding at higher frequencies.