Singapore Management University
NBER Working Papers and Publications
|March 2004||Equity Style Returns and Institutional Investor Flows|
with Kenneth A. Froot: w10355
This paper explores institutional investor trades in stocks grouped by style and the relationship of these trades with equity market returns. It aggregates transactions drawn from a large universe of approximately $6 trillion of institutional funds. To analyze style behavior, we assign equities to deciles in each of five style dimensions: size, value/growth, cyclical/defensive, sector, and country. We find, first, strong evidence that investors organize and trade stocks across style-driven lines. This appears true for groupings both strongly and weakly related to fundamentals (e.g., industry or country groupings versus size or value/growth deciles). Second, the positive linkage between flows and returns emerges at daily frequencies, yet becomes even more important at lower frequencies. We ...
Published: Froot, Kenneth A. and Melvyn Teo. “Style Investing and Institutional Investors.” Journal of Financial and Quantitative Analysis 43, 4 (December 2008): 883-906.