Style investing is an investment approach in which securities are grouped into categories, and portfolio allocation is based on selection among "styles" rather than among individual securities.
Style investors, then, make portfolio allocation decisions by placing their money in broad categorizations of assets, such as small-cap, value, low-volatility, or emerging markets.[1] Some investors dynamically allocate across different styles and move funds back and forth between these styles depending on their expected performance.[1]
Styles enable institutional investors to organize and simplify their portfolio allocation decisions, as well as to measure and evaluate the performance of professional managers relative to standardized style benchmarks [1] (see style drift). An implication of style investing is that it could impact financial markets, causing stocks to move together.[2]
- ^ a b c "Style Investing" (PDF). Harvard Institute of Economic Research.
- ^ Barberis; Shleifer. "Style Investing" (PDF).