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Style Investing and Institutional Investors

Published online by Cambridge University Press:  06 April 2009

Kenneth Froot  and
Melvyn Teo
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Abstract

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.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 43 , Issue 4 , December 2008 , pp. 883 - 906
Copyright
Copyright © School of Business Administration, University of Washington 2008

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