Patrick Dennis Paper a Finalist for Smith Breeden Award

Feb. 12, 2003—A paper co-authored by Associate Professor Patrick Dennis, “Who Blinks in Volatile Markets, Individuals or Institutions?” was a finalist for The Journal of Finance’s prestigious Smith Breeden awards for 2002. 

The Smith Breeden prizes are awarded annually for the top three papers in The Journal of Finance. The nominated papers appeared in journal issues published from December 2001 to October 2002. 

“McIntire congratulates Patrick on this achievement,” said Dean Carl Zeithaml. “His consideration for this award is testimony to the high-caliber, influential research our faculty produces and from which our students and practitioners benefit.” 

The paper presents evidence supporting the notion that institutions “react more strongly than individuals when the absolute value of the return on the market is large on any given day” and that institutions exhibit herd behavior. The paper also argues that the type of institutional owner matters. For example, fund managers have more of an incentive to “run with the herd” than do other types of institutional managers because they are evaluated more frequently and because short-term performance is a priority.

“These findings partially dispell the notion that individual investors, who are considered by many market professionals to be naive, contribute more to market volatility than professional money managers,” Dennis said.

The paper was co-authored with Deon Strickland, of the U.S. Securities and Exchange Commission, and appeared in the October 2002 issue of The Journal of Finance. Dennis and Strickland previously received media coverage of their research for this paper in The New York Times and Chicago Tribune.