 Insights into the Market Impact of Different Investment StylesRon Bird, Lorenzo Casavecchia and Paul Woolley No 1, Working Paper Series from The Paul Woolley Centre for Capital Market Dysfunctionality, University of Technology, Sydney Abstract: Modern day equity markets are populated by investors pursuing a number of investment styles. In this paper we simulate the behaviour of investors pursuing various types of these styles in order to examine whether their interaction is a major contributing factor to inefficiencies within markets and particularly to the anomalous pricing behaviour identified in the literature. We found that small market fractions constituted by momentum and growth investors are very disruptive to markets, significantly increasing their volatility and causing mispricing for extended periods of time. They also induce an increase in both the risk and trading volume experienced by the other types of investors. We conclude that momentum and growth investing may be a source of the many market anomalies and serious thought should be given to policy, economic and social implications of equity pricing consistently not reflecting fundamental value. Keywords: heterogeneous agents; market efficiency; mispricing (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:uts:pwcwps:1 Access Statistics for this paper More papers in Working Paper Series from The Paul Woolley Centre for Capital Market Dysfunctionality, University of Technology, Sydney PO Box 123, Broadway, NSW 2007, Australia. Contact information at EDIRC. |
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