The influence that an investor (or a group of investors) exercises as to the process of selection of specific securities. Clientele effect is driven by an investor’s preferences for holding a particular security or a category of securities. The clientele effect comes into play when a group of investors seeks to buy a particular kind of security, affecting the price of the security when corporate policies undergo change or when new reality emerges.

For example, a change in policy might be perceived by shareholders to be adverse, and as a result, they may sell some or all of their holdings, sending the share price down. The policy change may trigger such a reaction by investors/ shareholders, and as a result impact the entire company.