What is the clientele effect?
The clientele effect is the notion that certain types of investors, who are interested in a certain type of security, will have an impact on the price when circumstances turn – whether that’s because of a change in policy or performance.
Where have you heard about the clientele effect?
Most companies will have experienced the clientele effect in some way or form, and you may even have contributed to it. For example, if an investor likes a certain kind of dividend and the company changes its policy, the investor may sell their security just because of that change.
What you need to know about the clientele effect.
There are two different sides to the clientele effect. One is the way certain investors actively look for stocks in a particular category and the second is the reactions these investors have to changes to a company’s policies and procedures. Public equities are sorted differently – there are mature stocks, blue chip stocks, dividend paying stocks and high growth stocks. Each type of stock will attract a certain investor, looking for specific results from their investments. For example dividend stock has a little shift in capital gains but benefits the investor with steady, periodic dividends.