This paper carries out style analysis for Russian mutual funds using monthly data from the National Managers’ Association over the period of January 2008-December 2017; specifically, it applies the RSBA method developed by Sharpe (1992) for evaluating the impact of style on returns and uses the Style Drift Score (SDS) introduced by Idzorek and Bertsch (2004) as a measure of a fund’s style drifting activity. The main findings can be summarized as follows. In the Russian case, there is a significant positive relationship between style consistency and profitability of funds. Further, Russian funds are characterized by a high level of style drift, namely deviations from the investment strategy declared at the time of registration as required by Russian law.
References
[1]
Barberis, N., & Shleifer, A. (2003). Style Investing. Journal of Financial Economics, 68, 161-199. https://doi.org/10.1016/s0304-405x(03)00064-3
[2]
Brown, K. C., Harlow, W. V., & Zhang, H. (2009). Staying the Course: The Role of Investment Style Consistency in the Performance of Mutual Funds. Working Paper, University of Texas.
[3]
Cao, C., Iliev, P., & Velthuis, R. (2017). Style Drift: Evidence from Small-Cap Mutual Funds. JournalofBanking&Finance,78, 42-57. https://doi.org/10.1016/j.jbankfin.2017.01.009
[4]
Cumming, D., Fleming, G., & Schwienbacher, A. (2009). Style Drift in Private Equity. JournalofBusinessFinance&Accounting,36, 645-678. https://doi.org/10.1111/j.1468-5957.2009.02137.x
[5]
Galloppo, G., & Trovato, G. (2017). Fundamental Driver of Fund Style Drift. Journal of AssetManagement,18, 99-123. https://doi.org/10.1057/s41260-016-0009-4
[6]
Herrmann, U., Rohleder, M., & Scholz, H. (2016). Does Style-Shifting Activity Predict Performance? Evidence from Equity Mutual Funds. TheQuarterlyReviewofEconomicsandFinance,59, 112-130. https://doi.org/10.1016/j.qref.2015.03.003
[7]
Huang, J., Sialm, C., & Zhang, H. (2011). Risk Shifting and Mutual Fund Performance. ReviewofFinancialStudies,24, 2575-2616. https://doi.org/10.1093/rfs/hhr001
[8]
Idzorek, T. M., & Bertsch, F. (2004). The Style Drift Score. The Journal of Portfolio Management,31, 76-83. https://doi.org/10.3905/jpm.2004.443323
[9]
Kurniawan, M., How, J., & Verhoeven, P. (2016). Fund Governance and Style Drift. Pacific-BasinFinanceJournal,40, 59-72. https://doi.org/10.1016/j.pacfin.2016.08.006
[10]
Moneta, F. (2015). Measuring Bond Mutual Fund Performance with Portfolio Characteristics. JournalofEmpiricalFinance,33, 223-242. https://doi.org/10.1016/j.jempfin.2015.03.012
[11]
Papadamou, S., Kyriazis, N., & Mermigka, L. (2017). Japanese Mutual Funds before and after the Crisis Outburst: A Style-and Performance-Analysis. International Journal of Financial Studies, 5, Article 9. https://doi.org/10.3390/ijfs5010009
[12]
Sharpe, W. F. (1992). Asset Allocation: Management Style and Performance Measurement. TheJournalofPortfolioManagement,18, 7-19. https://doi.org/10.3905/jpm.1992.409394
