This paper explores the importance and price implications of style investing by institutional investors in the stock market. To analyze styles, we assign stocks to deciles or segments across three style dimensions: size, value/growth, and sector. We find strong evidence that institutional investors reallocate across style groupings more intensively than across random stock groupings. In addition, we show that own segment style inflows and returns positively forecast future stock returns, while distant segment style inflows and returns forecast negatively. We argue that behavioral theories play a role in explaining these results.
Finance and Financial Management | Portfolio and Security Analysis
Journal of Financial and Quantitative Analysis
Cambridge University Press
FROOT, Kenneth and TEO, Melvyn.
Style Investing and Institutional Investors. (2008). Journal of Financial and Quantitative Analysis. 43, (4), 883-906. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/2542
Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.