Portfolio rebalancing, institutional ownership, and the small firm-January effect

We use monthly reported firm share ownership by institutions to provide direct evidence that portfolio rebalancing exists in the U.S. We find rebalancing exists in sufficient size to affect prices around the turn-of-the-year and conclude that portfolio rebalancing may be a substantial part of the sm...

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Bibliographic Details
Published inReview of financial economics Vol. 5; no. 1; pp. 19 - 29
Main Authors Porter, David C., Powell, Gary E., Weaver, Daniel G.
Format Journal Article
LanguageEnglish
Published New Orleans, La Elsevier Inc 1996
Elsevier
University of New Orleans, Division of Business and Economic Research
Elsevier Science Ltd
SeriesReview of Financial Economics
Subjects
Economic impact
Economic models
Efficient markets
Institutional investments
Portfolio performance
Statistical analysis
Stock prices
Studies
United States > US
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Summary:We use monthly reported firm share ownership by institutions to provide direct evidence that portfolio rebalancing exists in the U.S. We find rebalancing exists in sufficient size to affect prices around the turn-of-the-year and conclude that portfolio rebalancing may be a substantial part of the small firm-January effect in the U.S. The findings are more important than simply evidence leading to the resolution of an anomaly since they cast doubt on our current asset pricing models and on previous efficient markets studies. The findings also suggest that investor's asset allocations may not be optimally determined without the inclusion of a portfolio rebalancing parameter.
ISSN:1058-3300
1873-5924
DOI:10.1016/S1058-3300(96)90003-8