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Fields:

Style Investing and Institutional Investors

Journal of Financial and Quantitative Analysis 2008 43(4), 883-906
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 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 refurns positively forecast future stock returns, which distant segament style inflows and returns forecast negatively. We argue that behavioral theories play a role in explaining these results.