Characteristics of Institutional Investors in Equity Markets

Medium Equity Market Structure Market Participants

In the equity market, various participants play crucial roles, influencing market dynamics through their activities and strategies. One such participant is the institutional investor, known for managing large pools of capital and typically taking a long-term investment approach.

Consider the following scenario: A large pension fund greatly impacts stock prices by making significant trades based on fundamental analysis. This pension fund has a management team that actively engages with the companies in which they invest, seeking to understand their operations and long-term strategies better.

Based on this scenario, which of the following statements best captures the characteristics and influence of institutional investors in the equity market?

Institutional investors primarily focus on short-term trading strategies to capitalize on price movements.

Institutional investors, like pension funds, generally employ fundamental analysis to make investment decisions with a long-term horizon.

Institutional investors are usually passive market participants that do not influence stock prices significantly.

Hint

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