Journal of Banking and Finance
book-to-market effect, hedge funds, institutional demand
Business | Finance and Financial Management
Recent studies have documented that institutional investors trade contrary to the predictions of the book-to market anomaly. We examine whether a prominent sub-group of institutional investors, namely hedge funds, differ from other institutions in terms of their trading behavior with respect to the book-to-market effect. We find that hedge funds significantly alter their trading preferences with respect to growth and value stocks, after book-to-market values become public information. More importantly, we show that hedge funds are better able to identify overpriced growth stocks compared to other institutions. Our results contribute to the literature on institutional investors’ trading with respect to stock return anomalies.
Caglayan, Mustafa Onur; Celiker, Umut; and Sonaer, Gokhan, "Hedge Fund vs. Non-Hedge Fund Institutional Demand and the Book-to-Market Effect" (2018). Business Faculty Publications. 259.
NOTICE: this is the author’s version of a work that was accepted for publication in the Journal of Banking and Finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in the Journal of Banking and FInance, 92, 07-01-2018; 10.1016/j.jbankfin.2018.04.021