What drives the size and value factors?

I find that approximately 30% of price fluctuations in the Fama-French size and value factors are nonfundamental price pressures driven by correlated fund flows, which generate price movements that revert over time. Is this really demand-based price pressure? I show that the price effects happen exc...

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Veröffentlicht in:	Review of asset pricing studies 2022-12, Vol.12 (4), p.845-885
1. Verfasser:	Li, Jiacui
Format:	Artikel
Sprache:	eng
Schlagworte:	Aktienfonds Anlageverhalten Fama-French-Modell Fondsmanagement USA
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description	I find that approximately 30% of price fluctuations in the Fama-French size and value factors are nonfundamental price pressures driven by correlated fund flows, which generate price movements that revert over time. Is this really demand-based price pressure? I show that the price effects happen exclusively in periods when mutual funds place trades, a fact that is difficult to explain using traditional mechanisms such as unobserved investor preference changes. The estimated price elasticity is also consistent with other studies. Overall, my findings show that a sizable fraction of size and value factor movements do not represent economic risk. (JEL G10, G12, G23, G40)
doi_str_mv	10.1093/rapstu/raac016
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source	Oxford University Press Journals All Titles (1996-Current)
subjects	Aktienfonds Anlageverhalten Fama-French-Modell Fondsmanagement USA
title	What drives the size and value factors?
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