Time Variation in Mutual Fund Style Exposures

Posted: 14 Jul 2008

See all articles by Jan Annaert

Jan Annaert

University of Antwerp Department of Accounting & Finance; Antwerp Management School

Geert Van Campenhout

KU Leuven - FEB@HUBrussel

Abstract

Despite the wide acceptance of return-based style analysis, the method has several limitations. One important drawback is the assumption that style exposures are time-invariant. We apply results on break tests developed in Bai and Perron (1998, 2003) to test for style breaks. We find strong evidence against the hypothesis of constant time exposures in daily return data for European equity funds. All funds exhibit at least one break, and 60% exhibit more than one break. We show that the main reason for style breaks is the mutual funds' reliance on conditional investment strategies based on public information and volatility estimates.

Keywords: C22, C52, G11, G20

Suggested Citation

Annaert, Jan and Van Campenhout, Geert, Time Variation in Mutual Fund Style Exposures. Review of Finance, Vol. 11, Issue 4, pp. 633-661, 2007. Available at SSRN: https://ssrn.com/abstract=1159626 or http://dx.doi.org/10.1093/rof/rfm029

Jan Annaert (Contact Author)

University of Antwerp Department of Accounting & Finance ( email )

Faculty of Applied Economics
Prinsstraat 13
Antwerp, B-2000
Belgium

HOME PAGE: http://https://www.uantwerp.be/en/staff/jan-annaert/

Antwerp Management School ( email )

Boogkeers 5
Antwerp, 2000
Belgium

Geert Van Campenhout

KU Leuven - FEB@HUBrussel ( email )

Warmoesberg 26
Brussel, 1000
Belgium

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