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Complementary or contradictory? Combining returns-based and characteristics-based investment style analysis

Author

Listed:
  • Andrew Mason
  • Frank McGroarty

    (Southampton Management School, University of Southampton)

  • Steve Thomas

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 analysis are complementary. Out-of-sample tests confirmed two things: membership of style groups explains a significant degree of cross-sectional performance of mutual funds, and the cumulative effect of combining BFI (Best Fit Index) 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.

Suggested Citation

  • Andrew Mason & Frank McGroarty & Steve Thomas, 2013. "Complementary or contradictory? Combining returns-based and characteristics-based investment style analysis," Journal of Asset Management, Palgrave Macmillan, vol. 14(6), pages 423-438, December.
    • Handle: RePEc:pal:assmgt:v:14:y:2013:i:6:d:10.1057_jam.2014.4
    DOI: 10.1057/jam.2014.4
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    References listed on IDEAS

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