Style Investing, Mutual Fund Flows, and Return Comovement

34 Pages Posted: 16 Mar 2010 Last revised: 21 Mar 2023

See all articles by Zhen Shi

Zhen Shi

Georgia State University

Multiple version iconThere are 2 versions of this paper

Date Written: March 21, 2023

Abstract

We explore whether style investing by mutual fund investors contributes to return comovement of stocks in the same style, classified by market capitalization and book-to-market ratio. We find that a stock’s comovement with other stocks in its style is significantly greater when this stock is owned by mutual funds that focus on the stock’s style. This increase in comovement is larger for stocks owned in greater proportion relative to their shares outstanding. Flows into or out of a mutual fund style positively affect return comovement; the effect is more pronounced for index funds than for actively managed funds.

Keywords: Style Investing, Mutual Fund, Flows, and Return Comovement

JEL Classification: G02, G12, G23

Suggested Citation

Shi, Zhen, Style Investing, Mutual Fund Flows, and Return Comovement (March 21, 2023). AFA 2011 Denver Meetings Paper, Available at SSRN: https://ssrn.com/abstract=1572226 or http://dx.doi.org/10.2139/ssrn.1572226

Zhen Shi (Contact Author)

Georgia State University ( email )

35 Broad Street
Atlanta, GA 30303-3083
United States

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