Which Investors Drive Anomaly Returns and How?

70 Pages Posted: 21 Oct 2022 Last revised: 2 Aug 2023

See all articles by Andrea Tamoni

Andrea Tamoni

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick

Stanislav Sokolinski

Michigan State University - Department of Finance

Yizhang Li

Rutgers Business School - Rutgers University

Date Written: August 1, 2023

Abstract

The origins of asset pricing anomalies have long been a highly debated puzzle in financial economics. We provide new evidence on the sources of anomalies by linking the variation in anomaly returns to investor demand. The demand for stock fundamentals accounts for 38% of the variation, while uninformed demand shocks contribute another 38%. Flow-induced trading explains only 12% of the variation. The impact of demand from households and small institutions is particularly strong, whereas the effects of large institutions are far less significant. Our results indicate that most of the variation in anomaly returns cannot be attributed to stock fundamentals or fund flows, thereby challenging both the risk-based theories and models of institutional frictions.

Keywords: Demand-based, Factor Investing, Anomalies, Institutional Investors, Portfolio Choice.

JEL Classification: G11, G12, G23.

Suggested Citation

Tamoni, Andrea and Sokolinski, Stanislav and Li, Yizhang, Which Investors Drive Anomaly Returns and How? (August 1, 2023). Available at SSRN: https://ssrn.com/abstract=4242745 or http://dx.doi.org/10.2139/ssrn.4242745

Andrea Tamoni (Contact Author)

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick ( email )

1 Washington Park
Newark, NJ 07102
United States

Stanislav Sokolinski

Michigan State University - Department of Finance ( email )

315 Eppley Center
East Lansing, MI 48824-1122
United States

Yizhang Li

Rutgers Business School - Rutgers University ( email )

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
460
Abstract Views
1,373
Rank
105,521
PlumX Metrics