Greener pastures and the impact of dynamic institutional preferences
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Bennett, JA
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机构:Washington State Univ, Coll Business & Econ, Dept Finance Insurance & Real Estate, Pullman, WA 99164 USA
Bennett, JA
Sias, RW
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Washington State Univ, Coll Business & Econ, Dept Finance Insurance & Real Estate, Pullman, WA 99164 USAWashington State Univ, Coll Business & Econ, Dept Finance Insurance & Real Estate, Pullman, WA 99164 USA
Sias, RW
[1
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Starks, LT
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机构:Washington State Univ, Coll Business & Econ, Dept Finance Insurance & Real Estate, Pullman, WA 99164 USA
Starks, LT
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[1] Washington State Univ, Coll Business & Econ, Dept Finance Insurance & Real Estate, Pullman, WA 99164 USA
Although institutional investors have a preference for large capitalization stocks, over time they have shifted their preferences toward smaller, riskier securities. These changes in aggregate preferences have arisen primarily from changes in the preferences of each class of institution, rather than changes in the importance of different classes. Evidence also suggests that recent growth in institutional investment combined with this shift in preferences helps explain why markets in general, and smaller stocks in particular, have exhibited greater firm-specific risk and liquidity in recent years. Additional analyses suggest that institutional investors moved toward smaller securities because such securities offer "greener pastures".