Hill acknowledges funding from the Australian Research Council (ARC Discovery grant DP0666798). The views expressed in this paper are those of the authors and do not necessarily reflect those of the Russell Investment Group. We thank two anonymous referees for their insightful comments. Address correspondence to Robert Hill.
Measuring fund style, performance and activity: a new style-profiling approach
Article first published online: 28 OCT 2013
© 2013 AFAANZ
Accounting & Finance
How to Cite
Buncic, D., Eggins, J. E., Hill, R. J. (2013), Measuring fund style, performance and activity: a new style-profiling approach. Accounting & Finance. doi: 10.1111/acfi.12047
- Article first published online: 28 OCT 2013
- Manuscript Accepted: 13 AUG 2013
- Manuscript Received: 5 SEP 2012
- Characteristic-matched benchmark;
- Fund activity;
- Investment performance;
- Investment style;
- Portfolio management
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.