If you have spent time studying modern asset pricing models, you are likely familiar with the asset growth anomaly. First popularized in academic literature by Cooper, Gulen, and Schill in their 2008 study “Asset Growth and the Cross-Section of Stock Returns,” this anomaly describes a persistent market inefficiency: companies that aggressively grow their assets (often through major capital investments or acquisitions) tend to heavily underperform the market in the subsequent months. It’s the classic “empire-building” or overinvestment trap where corporate expansion fails to deliver shareholder value.
But while this anomaly is well-documented and forms the basis of modern risk factors (like the Fama-French “investment” factor), a critical question remained: Who is trading on this signal? Do institutional investors recognize this overpricing and correct it, or do they blindly fuel the fire?
Umut Celiker and Gokhan Sonaer, authors of the study “How Do Institutional Investors Trade Asset Growth Anomaly?” published in the June 2026 issue of The Journal of Investing, tackle this question. By digging into decades of institutional holdings data, they reveal that when it comes to sophisticated market anomalies, not all “smart money” is created equal.
What the Authors Examined
Celiker and Sonaer set out to track exactly how different types of institutional investors shift their portfolios around a firm’s asset growth cycles. Motivated by evidence of hedge fund sophistication, they compared hedge funds (typically viewed as sophisticated arbitrageurs with flexible mandates) against non-hedge fund institutions (mutual funds, pension funds, insurance companies, etc.).
Using quarterly institutional holdings data spanning from July 1995 through June 2023, they tracked institutional demand (defined as changes in a fund’s ownership ratio in a stock) across a six-quarter timeline. This allowed them to monitor buying and selling behavior before and after a company’s financial statements (10-K filings) made their asset growth numbers fully public.
Key Findings: The Great Institutional Divergence
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