Marshall E. Blume

Marshall E. Blume
  • Howard Butcher III Professor Emeritus of Financial Management; Professor Emeritus of Finance

Contact Information

  • office Address:

    3253 Steinberg-Dietrich Hall
    Philadelphia, PA 19104

Research Interests: financial markets, fixed income securities, investment behavior, investments



PhD, University of Chicago, 1968; MBA, University of Chicago, 1965; SB, Trinity College, 1963

Academic Positions Held

Wharton: 1967-present (Director, Rodney L. White Center for Financial Research, 1986-present, Associate Director,1971-86; Director, Weiss Center for International Financial Research, 1990-92; Chairperson, Finance Department, 1982-86; named Howard Butcher III Professor of Financial Management, 1978). Previous appointment: University of Chicago. Visiting appointments: New University of Lisbon, Portugal; European Institute for Advanced Studies in Management, Belgium; Stockholm School of Economics; Free University of Brussels, Belgium

Professional Leadership 2005-2009

Editorial Board, Journal of Pension Fund Management & Investment, 1994-present; Associate Editor, Journal of Fixed Income, 1991-present

Corporate and Public Sector Leadership 2005-2009

Chairman, NASD Economic Advisory Board, 1995-present; Manager, Measey Foundation, 1995-present

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  • Marshall E. Blume and Donald B. Keim (Forthcoming), The Changing Nature of Institutional Stock Investing. Abstract

    We document that institutional investors, particularly hedge funds, decreased their holdings of larger stocks from 1980 to 2010 and increased their holdings of smaller stocks.  Since 1990 institutions have underweighted, relative to market weights, those stocks that make up the largest 40 percent of the value of the market, and since 2006 have overweighted the stocks that make up the smallest 20 percent of the market.  The contrary findings in the literature that institutions overweight larger stocks and underweight smaller stocks (e.g., Gompers and Metrick (2001) and Bennett, Sias and Starks (2003)) are due to the use of a linear relation between institutional ownership and the logarithm of market value.  In fact, we show that this relation is nonlinear and resembles an inverted U.  We discuss three factors that may have contributed to these changes in institutional holdings: better understanding of diversification; growing awareness of the small stock premium; and less efficient pricing of smaller stocks relative to larger stocks.

  • Marshall E. Blume and Donald B. Keim (Working), Stale or Sticky Stock Prices? Non-Trading, Predictability, and Mutual Fund Returns. Abstract

    The observed predictability in indexes and domestic mutual funds has been attributed to stale prices. Market timing of mutual funds exploits this predictability. We show that there are few stale prices for stocks in the top few deciles of market value and that mutual funds
    concentrate their holding in these deciles. Still, we observe predictability in the returns of portfolios and mutual funds holding these stocks. Much of this predictability is due to stickiness, or momentum, in market returns and not stale prices. Thus, the often suggested use of “fairvalue” accounting will not eliminate the profitability of market timing.

  • Marshall E. Blume, Donald B. Keim, Sandeep Patel (1991), Returns and Volatility of Low-Grade Bonds: 1977-1989, Journal of Finance.
  • Marshall E. Blume and Donald B. Keim (Working), The Valuation of Callable Bonds.
  • Marshall E. Blume and Donald B. Keim (1987), Lower-Grade Bonds: Their Risks and Returns, Financial Analysts Journal. Abstract

  • Marshall E. Blume and Robert F. Stambaugh (1983), Biases in Computed Returns: An Application to the Size Effect, Journal of Financial Economics, 387-404. Abstract

    Previous estimates of a ‘size effect’ based on daily returns data are biased. The use of quoted closing prices in computing returns on individual stocks imparts an upward bias. Returns computed for buy-and-hold portfolios largely avoid the bias induced by closing prices. Based on such buy-and-hold returns, the full-year size effect is half as large as previously reported, and all of the full-year effect is, on average, due to the month of January.


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