This study explores the relationship between institutional shareholding with stock
returns volatility in 195 non-financial firms listed on Pakistan Stock Exchange (PSX).
The panel data of sample firms is collected from annual reports, Pakistan Stock
Exchange (PSX) and State Bank of Pakistan (SBP). We apply multivariate OLS and
GMM regression method to the panel data for analysis of correlation between
institutional shareholding with stock returns volatility. The results are consistent
with our hypothesis that institutions are risk averse and prefer to invest in low
volatile stock. Further analysis show that the impact investment institutions is
negative on the stock returns volatility. The shareholding by investment institutions
is slightly higher in dividend paying firms than non-dividend paying firms. Our
results show the significant role of investment institutions in the stability of
Pakistan Stock Exchange (PSX).
