Style Effects in the Cross-Section of Stock Returns

Teo, Melvyn; Woo, Sung-Jun

doi:10.2139/ssrn.286673

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Style Effects in the Cross-Section of Stock Returns

AFA 2003 Washington, DC Meetings

44 Pages Posted: 22 Oct 2001

See all articles by Melvyn Teo

Melvyn Teo

Singapore Management University - Lee Kong Chian School of Business

Sung-Jun Woo

Harvard University - Department of Economics

Date Written: November 2004

Abstract

Using CRSP stock and mutual fund data, we find strong evidence for reversals at the style level (e.g., large value, small growth, etc.). There are significant excess and risk-adjusted returns for stocks in styles characterized by the worst past returns and net inflows. We also find evidence for momentum and positive feedback trading at the style level. These value and momentum effects are driven neither by fundamental risk nor by stock-level reversals and momentum. Taken together, the results are consistent with the style-level positive feedback trading model of Barberis and Shleifer (2003).

Keywords: Style, Style investing, Return predictability

JEL Classification: G12, G14

Suggested Citation: Suggested Citation

Teo, Melvyn and Woo, Sung-Jun, Style Effects in the Cross-Section of Stock Returns (November 2004). AFA 2003 Washington, DC Meetings, Available at SSRN: https://ssrn.com/abstract=286673 or http://dx.doi.org/10.2139/ssrn.286673