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Active style drift and mutual fund performance

Author

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  • Shin, Jungcheol
  • Kim, Daehwan

Abstract

We empirically investigate the effect of active style drift (i.e., changes in style resulting from managers’ deliberate rebalancing) on mutual fund performance. Our measure of active style drift is based on monthly holdings data, which enables us to capture short-term changes in style. We examine all active equity mutual funds registered in Korea between 2009 and 2023 and find that intermediate-term active style drift leads to performance gains in subsequent periods. Further analyses suggest that at least some managers possess style timing skills. We also explore the possible role of style-level momentum.

Suggested Citation

  • Shin, Jungcheol & Kim, Daehwan, 2025. "Active style drift and mutual fund performance," Finance Research Letters, Elsevier, vol. 81(C).
    • Handle: RePEc:eee:finlet:v:81:y:2025:i:c:s1544612325007573
    DOI: 10.1016/j.frl.2025.107498
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    More about this item

    Keywords

    Active style drift; Mutual fund performance; Holding-based measure; Style timing skills; Style-level momentum;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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