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Global equity fund performance adjusted for equity and currency factors

David Gallagher, Graham Harman, Camille H. Schmidt and Geoffrey J. Warren

Accounting and Finance, 2022, vol. 62, issue S1, 1535-1565

Abstract: We present a method for evaluating performance of global equity funds that decomposes excess returns versus market indices into contributions from six equity and three currency factors plus alpha. We apply the method to a sample of institutional fund mandates, and uncover outperformance stemming from stock selection while finding that both equity and currency factor exposures detract from returns. Our methodological contribution is to propose a portfolio holding‐based approach for identifying return sources for funds investing internationally that can account for multiple factor exposures including those arising from currency.

Date: 2022
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