The equal-weight tilt in managed portfolios

Bernd Hanke, Aneel Keswani, Garrett Quigley, David Stolin and Maxim Zagonov

Economics Letters, 2019, vol. 182, issue C, 59-63

Abstract: Active portfolios can be more concentrated or more diversified than the market portfolio. In the latter case, the result is likely to be a tilt toward equal weights, which has been shown to have a systematic impact on portfolio returns. To capture this tilt, we use the difference between returns on equal-weighted and value-weighted portfolios for the relevant universe; we call this difference Equal-Minus-Value, or EMV. Despite EMV’s simplicity, its ability to explain mutual fund returns compares very favorably with that of the most popular performance evaluation factors. We therefore argue that EMV should be used in performance evaluation of broad market equity portfolios.

Keywords: Asset management; Mutual funds; Performance evaluation (search for similar items in EconPapers)
JEL-codes: G11 G23 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:182:y:2019:i:c:p:59-63

DOI: 10.1016/j.econlet.2019.06.003

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