Global Equity Fund Performance Evaluation with Equity and Currency Style Factors
37 Pages Posted: 18 Oct 2016 Last revised: 19 Apr 2021
Date Written: April 16, 2021
We present a method for evaluating performance of global equity funds that decomposes excess returns versus market indices into contributions from six equity and three currency factors plus alpha. We apply the method to a sample of institutional fund mandates, and uncover outperformance stemming from stock selection while finding that both equity and currency factor exposures detract from returns. Our methodological contribution is to propose a portfolio holding-based approach for identifying return sources for funds investing internationally that can account for multiple factor exposures including those arising from currency.
Keywords: Global Equities, Performance Evaluation, Active Management, Currency
JEL Classification: G23
Suggested Citation: Suggested Citation