Open AccessStyle analysis for diversified US equity funds
Author(s) -
Andrew Mason,
Frank McGroarty,
Steve Thomas
Publication year - 2012
Publication title -
journal of asset management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.362
H-Index - 16
eISSN - 1479-179X
pISSN - 1470-8272
DOI - 10.1057/jam.2012.6
Subject(s) - style analysis , sharpe ratio , equity (law) , investment style , benchmarking , returns based style analysis , hedge fund , asset allocation , market segmentation , investment strategy , mutual fund , style (visual arts) , alternative investment , economics , actuarial science , econometrics , financial economics , business , passive management , fund of funds , finance , marketing , portfolio , microeconomics , return on investment , open ended investment company , geography , political science , transaction cost , law , production (economics) , market liquidity , archaeology
In this study we consider two methods of returns based style analysis for classification of investment styles for a single asset class, US Diversified Equity Funds. We extend Sharpe’s (1992) style Returns Based Style Analysis (RBSA) by forming style groups using cluster analysis and RBSA factors. We also introduce a parsimonious Best Fit Index (BFI) of style classification which explicitly acknowledges the existence of market segmentation and practitioner benchmarking. The methods provide complementary information about mutual fund returns. Both methodologies explain a significant proportion of the cross section of out of sample returns, but the BFI method performs better out-of-sample is more transparent and more closely aligned to investment practice
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