Measuring fund style, performance and activity: a new style-profiling approach

Daniel Buncic, Jon E. Eggins, Robert Hill () and David Gallagher

Accounting and Finance, 2015, vol. 55, issue 1, 29-55

Abstract: type="main" xml:id="acfi12047-abs-0001">

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.

Date: 2015
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