Mutual Fund Style, Characteristic-Matched Performance Benchmarks and Activity Measures: A New Approach

45 Pages Posted: 24 Jun 2010

See all articles by Daniel Buncic

Daniel Buncic

Stockholm University - Stockholm Business School

Robert J. Hill

UNSW Australia Business School, School of Economics

Jon Edward Eggins

Russell Investments

Date Written: June, 22 2010

Abstract

We propose a new approach for measuring mutual fund style and constructing characteristic-matched performance benchmarks that requires only portfolio holdings and two reference portfolios in each style dimension. The characteristic-matched performance benchmark literature typically follows a bottom-up approach by first matching individual stocks with benchmarks and then obtaining a portfolio’s excess return as a weighted average of the excess returns on each of its constituent stocks. Our approach is fundamentally different in that it matches portfolios and benchmarks directly. We illustrate our approach using portfolio holdings of 1183 fund managers over the period 2002-2009. We characterize the cross-section of fund manager styles and show how average style changes over time. The tracking error volatilities of our characteristic-matched benchmarks compare favorably with those of existing methods. Using our benchmarks we explore the link between activity and performance.

Keywords: Performance Measurement, Tailored Benchmark, Characteristic Matching, Size Profile, Growth Profile, Activity, Excess Return

JEL Classification: C43, G11, G23

Suggested Citation

Buncic, Daniel and Hill, Robert James and Eggins, Jon Edward, Mutual Fund Style, Characteristic-Matched Performance Benchmarks and Activity Measures: A New Approach (June, 22 2010). UNSW Australian School of Business Research Paper No. 2010 ECON 12, Available at SSRN: https://ssrn.com/abstract=1628924

Daniel Buncic (Contact Author)

Stockholm University - Stockholm Business School

Sweden

Robert James Hill

UNSW Australia Business School, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

Jon Edward Eggins

Russell Investments ( email )

909 A Street
Tacoma, WA 98402
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
333
Abstract Views
926
rank
102,127
PlumX Metrics