Strategic Complementarity and Substitutability of Investment Strategies

52 Pages Posted: 10 Jan 2022

See all articles by Nikolay Doskov

Nikolay Doskov

LGT Capital Partners

Thorsten Hens

University of Zurich - Department of Banking and Finance; Norwegian School of Economics and Business Administration (NHH); Swiss Finance Institute

Klaus Reiner Schenk-Hoppé

University of Manchester - Department of Economics

Date Written: January 6, 2022

Abstract

Institutional investors in equities tend to follow well-defined investment strategies, often based on factors such as size, value, momentum, quality, dividend yield and other stock characteristics. This paper explores the impact of capital flows between investment strategies on the cross-section of their performance. We find that the correlation between factor performance and the cyclical nature of risk premia can be explained by capital flows. The CAPM with a non-mean-variance investor supports these results.

Suggested Citation

Doskov, Nikolay and Hens, Thorsten and Schenk-Hoppé, Klaus Reiner, Strategic Complementarity and Substitutability of Investment Strategies (January 6, 2022). Swiss Finance Institute Research Paper No. 22-04, 2022, Available at SSRN: https://ssrn.com/abstract=4003060 or http://dx.doi.org/10.2139/ssrn.4003060

Nikolay Doskov

LGT Capital Partners ( email )

Pfa ̈ffikon
Switzerland

Thorsten Hens (Contact Author)

University of Zurich - Department of Banking and Finance ( email )

Plattenstrasse 32
Zurich, 8032
Switzerland
+41-44 634 37 06 (Phone)

Norwegian School of Economics and Business Administration (NHH)

Helleveien 30
Bergen, 5045
Norway

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Klaus Reiner Schenk-Hoppé

University of Manchester - Department of Economics ( email )

Arthur Lewis Building
Oxford Road
Manchester, M13 9PL
United Kingdom

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