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What Were Institutions Up To With Micron Technology?

Apr. 11, 2018 12:42 PM ETMicron Technology, Inc. (MU)252 Comments
Kwan-Chen Ma profile picture
Kwan-Chen Ma


  • MU's short volume increased sharply surrounding institutions’ upgrade and downgrade announcements.
  • MU's stock prices dropped 16% in response to downgrades and jumped 10% in response to upgrades.
  • More importantly, short volume increased prior to both upgrade and downgrade announcements.
  • We discussed one rational explanation and left the rest to your imagination.

By K C Ma and Matthew Sweeney

Micron Technology (NASDAQ: MU), a bellwether stock for the semiconductor industry, has been long known to be affected by institutions' analyst recommendations. In this article, we examined short sale activities surrounding the releases of institutions' upgrades and downgrades on MU. The institutions in this study included Morgan Stanley, Baird, Nomura, Mizuho, Cross Research, Summit Redstone, and Susquehanna whose analyst reports have been capable of exerting market-moving impacts. We like to explore the information content that MU investors can use from decisions of these institutions' rating changes.

Upgrades and Downgrades

In order to isolate the “clean” market impact, we selected the downgrade reports only if there were no major ER events and no other major analysts’ reports one month prior. Furthermore, the rating changes needed to have a price impact, which verifies the existence of new information. Accordingly, the four downgrade and five upgrade reports were identified (Table 1-A and Table 1-B). Since MU is the stock in interest, the market data including daily short sale and price were collected for the 30-day time period surrounding the report dates. The following are the findings on the changes in market activities around the dates.

Downgrade Announcements

Since these large, influential institutions issued the downgrade reports, it is expected that resulting bearishness will encourage short sale activities. On average, the short volume increased to 5 million shares at the release date, compared to less than 1 million in the regular period (Figure 2). There will be an obvious selling pressure on MU shares following the release of downgrade reports, especially from the well-known investment banks. The short volume picked up around 5 million over the days immediately following the report. Because of the selling after the downgrades, MU's price dropped from $18 to $15, approximately a 16% loss. To be clear, up to this point, we are only showing the case that these investment

This article was written by

Kwan-Chen Ma profile picture
K C Ma, Ph.D, CFA, is the Eminent Scholar and the Mary Ball Washington/Switzer Brothers Endowed Chair of Finance at University of West Florida. I am the Director of Argo Investments Institute which enables college students to manage real money stock, bond, and option funds. I manage market-neutral institutional hedge funds in KCM Asset Management. I write about stocks, bonds, and derivative strategies, long or short, based on our quantitative processes.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

We will be glad to provide all the data used in this study upon request. If you like this article, I would suggest that you follow my student Matthew Sweeney.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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