Measuring style tilting and decomposing style risk

Theofanis Darsinos () and Stephen Satchell
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Stephen Satchell: Faculty of Economics and Politics, University of Cambridge, Austin Robinson Building

Journal of Asset Management, 2004, vol. 5, issue 1, No 7, 64-71

Abstract: Abstract In this paper the authors examine the tendency of portfolio managers to under/over-weight portfolios with respect to a particular style such as book-to-price ratio, dividend yield, etc. The authors provide a test statistic for style tilting and a decomposition of ‘active’ risk for large cross-sectional portfolios with respect to exposures of a given attribute. The decomposition classifies risk into three categories — symmetric covariation, asymmetric covariation and variation — and allows the investment style to be identified and quantified.

Keywords: style tilting; risk decomposition; investment style; portfolio construction (search for similar items in EconPapers)
Date: 2004
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DOI: 10.1057/palgrave.jam.2240128

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