Style Investing and Institutional Investors

By Kenneth A. Froot, Melvyn Teo. 2008

140 citations recorded by the source corpus.

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.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/dba51f189d2bc7cda174a6af0739e30f839ada9b

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Citations in the corpus

Caught on tape: Institutional trading, stock returns, and earnings announcements (2009, background): “Froot, O’Connell, and Seasholes (2001), Froot and Ramadorai (2008), and Froot and Teo (2008) employ custodial data from State Street corporation, and they find evidence of flow persistence and bidirectional positive Granger causality between weekly institutional flows and returns on equity portfol”
Style investing, comovement and return predictability. (2013, unknown): “Empirical evidence on this is provided by Kumar (2009) and Froot and Teo (2008), who show that retail and institutional investors allocate capital at the style level and do so using size and value-growth dimensions.”