Style investing

Style investing We study asset prices in an economy where some investors categorize risky assets into different styles and move funds among these styles depending on their relative performance. In our economy, assets in the same style comove too much, assets in different styles comove too little, and reclassifying an asset into a new style raises its correlation with that style. We also predict that style returns exhibit a rich pattern of own- and cross-autocorrelations and that while asset-level momentum and value strategies are profitable, their style-level counterparts are even more so. We use the model to shed light on several style-related empirical anomalies. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Economics Elsevier

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Publisher
Elsevier
Copyright
Copyright © 2003 Elsevier Science B.V.
ISSN
0304-405x
D.O.I.
10.1016/S0304-405X(03)00064-3
Publisher site
See Article on Publisher Site

Abstract

We study asset prices in an economy where some investors categorize risky assets into different styles and move funds among these styles depending on their relative performance. In our economy, assets in the same style comove too much, assets in different styles comove too little, and reclassifying an asset into a new style raises its correlation with that style. We also predict that style returns exhibit a rich pattern of own- and cross-autocorrelations and that while asset-level momentum and value strategies are profitable, their style-level counterparts are even more so. We use the model to shed light on several style-related empirical anomalies.

Journal

Journal of Financial EconomicsElsevier

Published: May 1, 2003

References

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