Value versus growth investing: Why do different investors have different styles?

Henrik Cronqvist, Stephan Siegel, Frank Yu

Research output: Contribution to journalArticle

29 Scopus citations

Abstract

We find that several factors explain an individual investor's style, i.e., the value versus growth orientation of the investor's stock portfolio. First, we find that an investor's style has a biological basis and is partially ingrained in an investor from birth. Second, we show that an investor's hedging demands as well as behavioral biases explain investment style. Finally, an investor's style is explained by life course theory in that experiences, both earlier and later in life, are related to investment style. Investors with adverse macroeconomic experiences (e.g., growing up during the Great Depression or entering the labor market during an economic recession) or who grow up in a lower socioeconomic status rearing environment have a stronger value orientation several decades later. Our research contributes a new perspective to the long-standing value and growth debate in finance.

Original languageEnglish (US)
Pages (from-to)333-349
Number of pages17
JournalJournal of Financial Economics
Volume117
Issue number2
DOIs
StatePublished - Jan 1 2015
Externally publishedYes

Keywords

  • Growth investing
  • Investment behavior
  • Portfolio choice
  • Value investing

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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