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Style Investing

43 Pages Posted: 23 Jan 2001  

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)

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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). AFA 2002 Atlanta Meetings; Harvard Institute of Economic Research Paper No. 1908. Available at SSRN: https://ssrn.com/abstract=255557 or http://dx.doi.org/10.2139/ssrn.255557

Nicholas Barberis

Yale School of Management ( email )

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National Bureau of Economic Research (NBER)

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Andrei Shleifer (Contact Author)

Harvard University - Department of Economics ( email )

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Cambridge, MA 02138
United States
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617-496-1708 (Fax)

HOME PAGE: http://www.economics.harvard.edu/~ashleife/

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

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Belgium

HOME PAGE: http://www.ecgi.org

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