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from-the-field-175x95px.jpgFROM THE FIELD: Robeco researchers publish many whitepapers based on their own empirical studies. But they also closely follow quantitative research done by others. Head of Quantitative Equities Research David Blitz comments on notable external papers.

From the field: Institutional investors cause stock return anomalies?

23-03-2016 | Insight | David Blitz, PhD This study* shows that institutions typically trade on the wrong side of anomalies. For instance, they tend to buy growth stocks and sell value stocks, thereby going directly against the value anomaly.

The study also finds that anomalous returns are concentrated primarily in stocks with institutions on the wrong side of the implied mispricing, and argues that a behavioral explanation for these results appears to be most plausible. This may seem odd because institutions are generally thought of as ‘smart’ and well aware of the decades-old anomalies literature.

On the other hand, it is also plausible because institutional money management entails agency conflicts that have been documented before to result in suboptimal portfolio decisions, such as excessive turnover and herding for reputational reasons. Moreover, if anomalous returns are a consequence of mispricing, then the most obvious source of an impact big enough to distort asset prices is the beast with the largest footprint – institutions.

* * Edelen, Ince & Kadlec (2013), “Institutional Investors and Stock Return Anomalies”(November 19, 2013).
David Blitz

David Blitz, PhD

Head Quantitative Equities Research

“Factor investing, aimed at systematically capturing the value, momentum, low-volatility and other premiums, holds the future.”

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David Blitz, PhD
Head Quantitative Equities Research


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