Style Investing, Mutual Fund Flows, and Return Comovement

32 Pages Posted: 16 Mar 2010 Last revised: 22 Aug 2018

See all articles by Zhiyi Qian

Zhiyi Qian

W. P. Carey School of Business

Zhen Shi

Georgia State University

Date Written: August 20, 2018

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

Qian, Zhiyi and Shi, Zhen, Style Investing, Mutual Fund Flows, and Return Comovement (August 20, 2018). AFA 2011 Denver Meetings Paper, Available at SSRN: https://ssrn.com/abstract=1572226 or http://dx.doi.org/10.2139/ssrn.1572226

Zhiyi Qian

W. P. Carey School of Business ( email )

W. P. Carey School of Business
PO Box 873906
Tempe, AZ 85287-3906
United States

Zhen Shi (Contact Author)

Georgia State University ( email )

35 Broad Street
Atlanta, GA 30303-3083
United States

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