Style Drift and Portfolio Management for Active Australian Equity Funds

Andrew B. Ainsworth, Kingsley Fong and David Gallagher
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Andrew B. Ainsworth: Australian School of Business, The University of New South Wales, Sydney, NSW 2052.
Kingsley Fong: Australian School of Business, The University of New South Wales, Sydney, NSW 2052.

Australian Journal of Management, 2008, vol. 32, issue 3, 387-418

Abstract: Using monthly active equity fund portfolio holdings, we examine the magnitude of style drift and decompose it into active and passive components. We find that while fund style tilts are consistent with their self-stated investment objective, there is variation in the degree of style bias within style groups. We document that funds actively adjust their portfolio holdings in response to passive style drift to retain a desired portfolio tilt. The degree of adjustment varies with the frequency over which the drift is measured, with funds being most responsive to changes in book-to-market and momentum drift. We also find that certain types of style drift affect portfolio turnover.

Keywords: INVESTMENT STYLE; STYLE DRIFT; CONSISTENCY; PORTFOLIO MANAGEMENT; INVESTMENT PERFORMANCE (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:32:y:2008:i:3:p:387-418

DOI: 10.1177/031289620803200302

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