Complementary or Contradictory? Combining Returns Based & Characteristics Based Investment Style Analysis

Mason, Andrew; Thomas, Steve; McGroarty, Frank

doi:10.2139/ssrn.1868831

Complementary or Contradictory? Combining Returns Based & Characteristics Based Investment Style Analysis

43 Pages Posted: 21 Jun 2011 Last revised: 4 Aug 2011

See all articles by Andrew Mason

Andrew Mason

University of Surrey - Surrey Business School

Steve Thomas

City University London - Sir John Cass Business School

Frank McGroarty

University of Southampton - Southampton Business School

Date Written: May 21, 2011

Abstract

This study is the first to combine returns based (RBS) and characteristics based (CBS) style analysis into a single style analysis model. We address the issue of whether RBS and CBS style analysis complementary. Out of sample tests confirmed two things; membership of style groups explain a significant degree of cross sectional performance of mutual funds and secondly the cumulative effect of combining BFI and CBS analysis significantly improves on the CBS and BFI models in isolation. The ex post explanatory power of the combined model is greater than the individual parts.

Keywords: Investment Style, Mutual Funds, Portfolio, Style Analysis

JEL Classification: G10, G11, G14, G20, G23

Suggested Citation: Suggested Citation

Mason, Andrew and Thomas, Stephen H. and McGroarty, Frank, Complementary or Contradictory? Combining Returns Based & Characteristics Based Investment Style Analysis (May 21, 2011). Available at SSRN: https://ssrn.com/abstract=1868831 or http://dx.doi.org/10.2139/ssrn.1868831