Style Drift and Portfolio Management for Active Australian Equity Funds

Andrew B. Ainsworth, Kingsley Fong, David R. Gallagher

Research output: Contribution to journalArticle

13 Citations (Scopus)

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.

Original languageEnglish
Pages (from-to)387-418
Number of pages32
JournalAustralian Journal of Management
Volume32
Issue number3
DOIs
Publication statusPublished - 2008
Externally publishedYes

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