A Panel Regression Approach to Holdings-based Fund Performance Measures

Wayne Ferson () and Junbo L. Wang

No 28238, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Portfolio performance measures using holdings data are panel regressions. The returns of a fund’s stocks are regressed on its lagged portfolio weights. Stock fixed effects isolate average performance from time-series predictive ability. Control variables condition fund performance on the characteristics of the stocks held. The long term performance of average holdings drives some of the classical measures, while predictive ability drives others. A “buy-and-hold drift,” where portfolio weights increase over time in the higher alpha stocks, affects performance measures. Investor flows respond to average performance net of the buy-and-hold drift.

JEL-codes: G11 (search for similar items in EconPapers)
Date: 2020-12
Note: AP
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Published as Wayne Ferson & Junbo L Wang & Thierry Foucault, 2021. "A Panel Regression Approach to Holdings-Based Fund Performance Measures," The Review of Asset Pricing Studies, vol 11(4), pages 695-734.

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