A Unified Framework to Assess Market Implications of Institutional Investments

US financial markets are influenced by complex interactions of diverse entities like institutional investors, which control a considerable portion of all US financial assets. Despite significant increase in the institutional ownership over the last several years, detection of causal associations between institutional investments and equity markets remains elusive due to inherent intricacies of the investment behavior. In this paper, we propose a novel solution to establish linkages between the institutional investments and market dynamics. We accomplish this task by deploying a multi-stage methodology that includes evaluation of heterogeneous data from disparate sources, an integrated framework comprising of tools to facilitate unstructured- and structured- data modeling, data integration, unsupervised learning, and an evaluation approach to uncover discernible patterns capturing market fragility. Our results on the real data confirm the efficacy of the proposed solution by establishing linkages between the investment behavior and market movements. For instance, the results show that the co-ownership and selling of large capitalization stocks held by institutional investors drive market returns co-movements. Our results confirm the efficacy of the presented framework. The proposed solution can assist the economists and policy makers detect fraud and proactively prepare against disruptive market movements thereby minimizing the risk to the economy.