Abstract

http://ssrn.com/abstract=2351123
 
 

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Value versus Growth Investing: Why Do Different Investors Have Different Styles?


Henrik Cronqvist


China Europe International Business School (CEIBS)

Stephan Siegel


University of Washington - Michael G. Foster School of Business

Frank Yu


China Europe International Business School

September 3, 2014

Journal of Financial Economics (JFE), Forthcoming

Abstract:     
We find that several factors explain an individual investor's style, i.e., the value versus growth orientation of the investor's stock portfolio. First, we find that an investor's style has a biological basis and is partially ingrained in an investor from birth. Second, we document that investors' hedging demands as well as behavioral biases explain investment style. Finally, an investor's style is explained by life course theory in that experiences, both earlier and later in life, are related to investment style. Investors with adverse macroeconomic experiences (e.g., growing up during the Great Depression or entering the labor market during an economic recession) or who grow up in a lower socioeconomic status rearing environment have a stronger value orientation several decades later. Our research contributes a new perspective to the long-standing value/growth debate in finance.

Number of Pages in PDF File: 41

Keywords: Investment behavior, Portfolio choice, Value investing, Growth investing

JEL Classification: D10; D31; G11

Accepted Paper Series


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Date posted: November 7, 2013 ; Last revised: September 4, 2014

Suggested Citation

Cronqvist, Henrik and Siegel, Stephan and Yu, Frank, Value versus Growth Investing: Why Do Different Investors Have Different Styles? (September 3, 2014). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: http://ssrn.com/abstract=2351123 or http://dx.doi.org/10.2139/ssrn.2351123

Contact Information

Henrik Cronqvist (Contact Author)
China Europe International Business School (CEIBS) ( email )
699 Hongfeng Road, Pudong
Shanghai, 201206
China
+86 21-2890-5653 (Phone)
HOME PAGE: http://sites.google.com/site/henrikcronqvist/
Stephan Siegel
University of Washington - Michael G. Foster School of Business ( email )
Box 353200
Seattle, WA 98195-3200
United States
HOME PAGE: http://faculty.washington.edu/ss1110/
Fang Yu
China Europe International Business School ( email )
Shanghai-Hongfeng Road
Shanghai 201206
Shanghai 201206
China
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