Hedge Fund vs. Non-Hedge Fund Institutional Demand and the Book-to-Market Effect

Posted: 7 Nov 2016 Last revised: 25 Nov 2018

See all articles by Mustafa Onur Caglayan

Mustafa Onur Caglayan

Florida International University

Umut Celiker

Cleveland State University - Monte Ahuja College of Business

Gokhan Sonaer

Duquesne University

Date Written: December 19, 2017

Abstract

Recent studies have documented that institutional investors trade contrary to the predictions of the book-to market anomaly. We examine whether a prominent sub-group of institutional investors, namely hedge funds, differ from other institutions in terms of their trading behavior with respect to the book-to-market effect. We find that hedge funds significantly alter their trading preferences with respect to growth and value stocks, after book-to-market values become public information. More importantly, we show that hedge funds are better able to identify overpriced growth stocks compared to other institutions. Our results contribute to the literature on institutional investors’ trading with respect to stock return anomalies.

Keywords: Book-To-Market Effect; Institutional Demand; Hedge Funds

JEL Classification: G10; G11; C13

Suggested Citation

Caglayan, Mustafa Onur and Celiker, Umut and Sonaer, Gokhan, Hedge Fund vs. Non-Hedge Fund Institutional Demand and the Book-to-Market Effect (December 19, 2017). Journal of Banking and Finance, Vol. 92, No. 51-66, 2018. Available at SSRN: https://ssrn.com/abstract=2864800 or http://dx.doi.org/10.2139/ssrn.2864800

Mustafa Onur Caglayan (Contact Author)

Florida International University ( email )

College of Business
11200 S.W. 8th St, Ryder Building 223B
Miami, FL 33199
United States
(305) 348-8430 (Phone)

HOME PAGE: http://https://business.fiu.edu/faculty/expert-guides.cfm?FlagDirectory=Display&EMP=caglayanm

Umut Celiker

Cleveland State University - Monte Ahuja College of Business ( email )

1860 E 18th St #420
Cleveland, OH 44114
United States

Gokhan Sonaer

Duquesne University ( email )

600 Forbes Avenue
Pittsburgh, PA 15282
United States
4123964315 (Phone)
4123964764 (Fax)

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