Style Investing

42 Pages Posted: 11 Dec 2000 Last revised: 5 Oct 2001

See all articles by Nicholas Barberis

Nicholas Barberis

Yale School of Management; National Bureau of Economic Research (NBER)

Andrei Shleifer

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: December 2000

Abstract

We study asset prices in an economy where some investors classify risky assets into different styles and move funds back and forth between these styles depending on their relative performance. Our assumptions imply that news about one style can affect the prices of other apparently unrelated styles, that assets in the same style will comove too much while assets in different styles comove too little, and that high average returns on a style will be associated with common factors for reasons unrelated to risk. They also lead to a rich pattern of own- and cross-autocorrelations, sample premia that can be very different from true premia, and imply that style momentum strategies will be profitable. We use our model to shed light on many puzzling features of the data.

Suggested Citation

Barberis, Nicholas and Shleifer, Andrei, Style Investing (December 2000). NBER Working Paper No. w8039, Available at SSRN: https://ssrn.com/abstract=253147

Nicholas Barberis (Contact Author)

Yale School of Management ( email )

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Andrei Shleifer

Harvard University - Department of Economics ( email )

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European Corporate Governance Institute (ECGI)

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