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Measuring fund style, performance and activity: a new style-profiling approach

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Listed:
  • Daniel Buncic
  • Jon E. Eggins
  • Robert J. Hill
  • David Gallagher

Abstract

type="main" xml:id="acfi12047-abs-0001"> 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.

Suggested Citation

  • Daniel Buncic & Jon E. Eggins & Robert J. Hill & David Gallagher, 2015. "Measuring fund style, performance and activity: a new style-profiling approach," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 55(1), pages 29-55, March.
    • Handle: RePEc:bla:acctfi:v:55:y:2015:i:1:p:29-55
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    File URL: http://hdl.handle.net/10.1111/acfi.2015.55.issue-1
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    References listed on IDEAS

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    1. Russ Wermers, 2000. "Mutual Fund Performance: An Empirical Decomposition into Stock‐Picking Talent, Style, Transactions Costs, and Expenses," Journal of Finance, American Finance Association, vol. 55(4), pages 1655-1695, August.
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    Cited by:

    1. Michael J O’Neill & Zhangxin (Frank) Liu, 2016. "Tail risk hedging for mutual funds using equity market state prices," Australian Journal of Management, Australian School of Business, vol. 41(4), pages 687-698, November.
    2. Michael J. O'Neill & Zhangxin Liu & Tom Smith, 2017. "Fund Volatility Index using equity market state prices," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 57(3), pages 837-853, September.
    3. Michael J. O'Neill & Geoffrey J. Warren, 2019. "Evaluating fund capacity: issues and methods," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 59(S1), pages 773-800, April.

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