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On Mutual Fund Investment Styles

Author

Listed:
  • Louis K. C. Chan
  • Hsiu-Lang Chen
  • Josef Lakonishok

Abstract

Most mutual funds adopt investment styles that cluster around a broad market benchmark. Few funds take extreme positions away from the index, but those who do are more likely to favor growth stocks and past winners. The bias toward glamour and the tendency of poorly performing value funds to shift styles may reflect agency and behavioral considerations. After adjusting for style, there is evidence that growth managers on average outperform value managers. Though a fund's factor loadings and its portfolio characteristics generally yield similar conclusions about its style, an approach using portfolio characteristics predicts fund returns better. Copyright 2002, Oxford University Press.

Suggested Citation

  • Louis K. C. Chan & Hsiu-Lang Chen & Josef Lakonishok, 2002. "On Mutual Fund Investment Styles," Review of Financial Studies, Society for Financial Studies, vol. 15(5), pages 1407-1437.
  • Handle: RePEc:oup:rfinst:v:15:y:2002:i:5:p:1407-1437
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