Who blinks in volatile markets, individuals or institutions?

We investigate the relationship between the ownership structure and returns of firms on days when the absolute value of the market's return is two percent or more. We find that a firm's abnormal return on these days is related to the percentage of institutional ownership, that there is abnormally high turnover in the firm's shares on these days, and that this abnormal turnover is significantly related to the percentage of institutional ownership in the firm. Taken together, these results are consistent with positive feedback herding behavior on the part of some institutions, particularly mutual and pension funds.