The active share of mutual funds drops significantly when investor sentiment is high, indicating that fund managers reduce their active stock selection and stay closer to their benchmarks during such periods. Our evidence is consistent with fund managers being sentiment-prone—challenging the...

The investor composition in the US stock market has been undergoing a dramatic shift towards greater institutional ownership. In this paper, we show that the increase in the stock ownership by institutions over time, especially those with focus on short-term performance, is positively related to...