Measuring Fund Style, Performance and Activity: A New Style‐Profiling Approach

27 Pages Posted: 11 Mar 2015

See all articles by Daniel Buncic

Daniel Buncic

Stockholm University - Stockholm Business School

Jon Edward Eggins

Russell Investments

Robert J. Hill

University of Graz

Date Written: March 2015

Abstract

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.

Keywords: Characteristic‐matched benchmark, Fund activity, Investment performance, Investment style, Portfolio management

Suggested Citation

Buncic, Daniel and Eggins, Jon Edward and Hill, Robert J., Measuring Fund Style, Performance and Activity: A New Style‐Profiling Approach (March 2015). Accounting & Finance, Vol. 55, Issue 1, pp. 29-55, 2015, Available at SSRN: https://ssrn.com/abstract=2576490 or http://dx.doi.org/10.1111/acfi.12047

Daniel Buncic

Stockholm University - Stockholm Business School

Sweden

Jon Edward Eggins (Contact Author)

Russell Investments ( email )

909 A Street
Tacoma, WA 98402
United States

Robert J. Hill

University of Graz ( email )

Universitaetsstrasse 15 / FE
A-8010 Graz, 8010
Austria

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