Dynamic style preferences of individual investors and stock returns

Research output: Contribution to journalArticlepeer-review

38 Scopus citations


This study shows that individual investors systematically shift their preferences across extreme style portfolios (small vs. large, value vs. growth). These preference shifts are influenced by past style returns and earnings differentials, and advice from investment newsletters, but are unaffected by innovations in macroeconomic variables or shifts in expectations about future cash flows. Furthermore, investors dynamic style preferences influence returns along multiple dimensions: i) the contemporaneous relation between style returns and style-level preference shifts is strong, ii) there is weak evidence of style return predictability, and iii) the correlations among stocks within a style increase when investors move into or out of the style with greater intensity. Overall, the results indicate that stock categorization influences investors portfolio decisions and stock returns.

Original languageEnglish (US)
Pages (from-to)607-640
Number of pages34
JournalJournal of Financial and Quantitative Analysis
Issue number3
StatePublished - Jun 2009
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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