Active style drift and mutual fund performance

Jungcheol Shin and Daehwan Kim

Finance Research Letters, 2025, vol. 81, issue C

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.

Keywords: Active style drift; Mutual fund performance; Holding-based measure; Style timing skills; Style-level momentum (search for similar items in EconPapers)
JEL-codes: G11 G12 G23 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:81:y:2025:i:c:s1544612325007573

DOI: 10.1016/j.frl.2025.107498

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