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Stock composition of mutual funds and fund style: a time series decomposition approach towards testing for consistency

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  • Jaydip Sen

Abstract

In this paper, we present a generic approach for checking the consistency between the proclaimed style of a mutual fund and the actual fund composition. We use a method of time series decomposition of stock prices to ascertain whether their inclusion in a particular style of fund is justified. It has been our contention that some share prices have a strong trend component in their time series, some show seasonality, while some share prices exhibit strong random component. We have chosen a sample of 11 equity-based mutual funds of varying styles, from Indian financial market and analysed whether the style of the fund matches with the stock composition of the fund. We feel that the retail investors, who buy into certain funds on the basic trust that fund managers have the requisite expertise, should know whether the portfolio matches what they promise. A detailed analysis of the results show that, while in majority of cases the actual allocation of funds is consistent with the corresponding fund style, there have been some notable deviations too.

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  • Jaydip Sen, 2018. "Stock composition of mutual funds and fund style: a time series decomposition approach towards testing for consistency," International Journal of Business Forecasting and Marketing Intelligence, Inderscience Enterprises Ltd, vol. 4(3), pages 235-292.
    • Handle: RePEc:ids:ijbfmi:v:4:y:2018:i:3:p:235-292
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    References listed on IDEAS

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    Cited by:

    1. Jaydip Sen & Arpit Awad & Aaditya Raj & Gourav Ray & Pusparna Chakraborty & Sanket Das & Subhasmita Mishra, 2022. "Stock Performance Evaluation for Portfolio Design from Different Sectors of the Indian Stock Market," Papers 2208.07166, arXiv.org.
    2. Jaydip Sen & Aditya Jaiswal & Anshuman Pathak & Atish Kumar Majee & Kushagra Kumar & Manas Kumar Sarkar & Soubhik Maji, 2023. "A Comparative Analysis of Portfolio Optimization Using Mean-Variance, Hierarchical Risk Parity, and Reinforcement Learning Approaches on the Indian Stock Market," Papers 2305.17523, arXiv.org.
    3. Abhiraj Sen & Jaydip Sen, 2023. "Performance Evaluation of Equal-Weight Portfolio and Optimum Risk Portfolio on Indian Stocks," Papers 2309.13696, arXiv.org.
    4. Jaydip Sen & Arup Dasgupta & Subhasis Dasgupta & Sayantani Roychoudhury, 2023. "A Portfolio Rebalancing Approach for the Indian Stock Market," Papers 2310.09770, arXiv.org.
    5. Jaydip Sen & Arup Dasgupta & Partha Pratim Sengupta & Sayantani Roy Choudhury, 2023. "A Comparative Study of Portfolio Optimization Methods for the Indian Stock Market," Papers 2310.14748, arXiv.org.
    6. Jaydip Sen & Saikat Mondal & Sidra Mehtab, 2021. "Analysis of Sectoral Profitability of the Indian Stock Market Using an LSTM Regression Model," Papers 2111.04976, arXiv.org.
    7. Jaydip Sen & Ashwin Kumar R S & Geetha Joseph & Kaushik Muthukrishnan & Koushik Tulasi & Praveen Varukolu, 2022. "Precise Stock Price Prediction for Robust Portfolio Design from Selected Sectors of the Indian Stock Market," Papers 2201.05570, arXiv.org.

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