Greener Pastures and the Impact of Dynamic Institutional Preferences

James A. Bennett, Richard W. Sias, Laura T. Starks

Research output: Contribution to journalArticlepeer-review

309 Scopus citations


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".

Original languageEnglish (US)
Pages (from-to)1203-1238
Number of pages36
JournalReview of Financial Studies
Issue number4
StatePublished - 2003

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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