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Measuring fund style, performance and activity: a new style‐profiling approach
Author(s) -
Buncic Daniel,
Eggins Jon E.,
Hill Robert J.
Publication year - 2015
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/acfi.12047
Subject(s) - returns based style analysis , style analysis , mutual fund , computer science , econometrics , portfolio , fund administration , target date fund , open end fund , mathematics , investment fund , economics , finance , institutional investor , asset allocation , corporate governance , market liquidity
We construct new measures of fund style, performance and activity from linear combinations of off‐the‐shelf stock‐market indices. A fund's benchmark portfolio is a linear combination of two or more reference portfolios that in a least‐squares sense most closely approximates the fund's portfolio. The resulting linear combination scalar is itself a measure of fund style and the distance between a fund and its benchmark is a measure of fund activity. Our approach has a number of advantages over existing characteristic‐matching methods. We illustrate our approach using a data set of US institutional funds.