Style Effects in the Cross-Section of Stock Returns

By Melvyn Teo, Sung-Jun Woo. 2004

174 citations recorded by the source corpus.

Using CRSP stock and mutual fund data, we find strong evidence for reversals at the style level (e.g., large value, small growth, etc.). There are significant excess and risk-adjusted returns for stocks in styles characterized by the worst past returns and net inflows. We also find evidence for momentum and positive feedback trading at the style level. These value and momentum effects are driven neither by fundamental risk nor by stock-level reversals and momentum. Taken together, the results are consistent with the style-level positive feedback trading model of Barberis and Shleifer (2003).

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/947293cacc83a8d246347b25c7b4552ad24e084e

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Citations in the corpus

Style investing, comovement and return predictability. (2013, unknown): “This is precisely what we find, offering a degree of consistency between long horizon reversals in style returns (Teo and Woo, 2004) and assetlevel returns.”
Style Investing and Institutional Investors (2008, background): “16Teo and Woo (2004) neither explore the effects of distant style segments nor can they investigate the short-term effects of style flows and returns given the quarterly frequency of their data.”
Which Factors Matter to Investors? Evidence from Mutual Fund Flows (2016, unknown): “The coefficient on the mean category exposure of a fund (CATSIZ) is reliably positive, which indicates fund flows indeed respond to the category-level exposure of a fund as in Teo and Woo (2004). However, the response of flows to the fund’s size category exposure is less than that associated with th”
Dumb Money: Mutual Fund Flows and the Cross-Section of Stock Returns (2008, methodology): “Following Barberis and Shleifer (2003), Teo and Woo (2004) consider categorical thinking by mutual fund investors along the dimensions of large/small or value/growth.”