The Changing Mosaic of Investment Patterns

Abstract

The stock market bubble of the late 1990s and its aftermath suggest that volatile short-term trends and our wider range of asset classes may require as a response a more fluid strategy than the standard stable policy asset allocation model. Three basic questions are: What do the recently available data on institutional and individual investor asset allocation indicate about how different types of investors respond to equity market movements? How should we understand these different behaviors? And what are the implications for equity markets? An integrated rebalancing model based on these findings offers a framework for development of more proactive allocation strategies.