Global Equity Fund Performance Evaluation with Equity and Currency Style Factors

37 Pages Posted: 18 Oct 2016 Last revised: 19 Apr 2021

See all articles by David R. Gallagher

David R. Gallagher

Rozetta Institute

Graham Harman

Russell Investments

Camille Schmidt

SuperRatings

Geoff Warren

Australian National University (ANU) - Research School of Finance, Actuarial Studies and Statistics

Date Written: April 16, 2021

Abstract

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

Gallagher, David R. and Harman, Graham and Schmidt, Camille and Warren, Geoffrey J., Global Equity Fund Performance Evaluation with Equity and Currency Style Factors (April 16, 2021). CIFR Paper No. 123/2016, Available at SSRN: https://ssrn.com/abstract=2854415 or http://dx.doi.org/10.2139/ssrn.2854415

David R. Gallagher (Contact Author)

Rozetta Institute ( email )

Sydney

Graham Harman

Russell Investments ( email )

909 A Street
Tacoma, WA 98402
United States

Camille Schmidt

SuperRatings

Australia

Geoffrey J. Warren

Australian National University (ANU) - Research School of Finance, Actuarial Studies and Statistics ( email )

CBE Building 26C
Kingsley Sreet, Acton
Canberra, ACT 0200
Australia

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