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| Author: | Annaert, J. Campenhout, G. van |
| Title: | Time variation in mutual fund style exposures |
| Journal: | Review of finance
2007 : DEC, VOL. 11:4, p. 633-661 |
| Index terms: | financial markets securities equities funds investments Europe |
| Language: | eng |
| Abstract: | The return-based style (hereafter as: stl.) analysis method has several limitations, e.g. the assumption that stl. exposures (as: exps.) are time-invariant. This paper applies results on break tests developed by Bai and Perron (publ. in 1998 and 2003) to test for stl. breaks. Strong evidence is found against the hypothesis of constant time exps. in daily return data for European equity funds. At least one break is exhibited by all funds, and 60 percent exhibit more than one break. It is shown that the main reason for stl. breaks is the mutual funds' reliance on conditional investment strategies based on public information and volatility estimates. |
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