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Portfolio rebalancing, institutional ownership, and the small firm‐January effect
Author(s) -
Porter David C.,
Powell Gary E.,
Weaver Daniel G.
Publication year - 1996
Publication title -
review of financial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.347
H-Index - 41
eISSN - 1873-5924
pISSN - 1058-3300
DOI - 10.1016/s1058-3300(96)90003-8
Subject(s) - portfolio , asset (computer security) , capital asset pricing model , monetary economics , economics , anomaly (physics) , financial economics , business , affect (linguistics) , linguistics , philosophy , physics , computer security , computer science , condensed matter physics
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.