Return-Based Style Analysis with Time-Varying Exposures
AbstractThis paper focuses on the estimation of mutual fund styles by return-based style analysis. Usually, the investment style is assumed to be either constant through time, or time variation is implicitly accounted for by using rolling regressions. The former assumption is often contradicted by data analysis, and the latter is inefficient due to its ad hoc chosen window size. We propose to use the Kalman filter to explicitly model time-varying exposures of mutual funds. This leads to a testable model and more efficient use of the data, which reduces the influence of spurious correlation between mutual fund returns and style indices.
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Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2001-96.
Date of creation: 2001
Date of revision:
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kalman filter; investment trusts; investment analysis;
Other versions of this item:
- Laurens Swinkels & Pieter Van Der Sluis, 2006. "Return-based style analysis with time-varying exposures," The European Journal of Finance, Taylor & Francis Journals, vol. 12(6-7), pages 529-552.
- Laurens Swinkels, Pieter Jelle VanDerSluis, 2001. "Return-based Style Analysis with Time-varying Exposures," Computing in Economics and Finance 2001 125, Society for Computational Economics.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G20 - Financial Economics - - Financial Institutions and Services - - - General
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-12-26 (All new papers)
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