Style Analysis

Beyond The Style Box: Unconstrained Returns Based Style Analysis

2012-03-27 01:18:41
Marc Odo
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One question we get at Zephyr is, “Is it possible for a manager to fall ‘outside the style box’? "Shouldn’t a high-momentum growth manager or a deep value manager fall beyond the corner indices?” The answer is yes, there is a way you can have managers plot outside the box.

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Style Analysis
Style Analysis

Style Analysis

StyleADVISOR implements returns based style analysis as set forth by Stanford professor and Nobel Prize winner William F. Sharpe. Returns based style analysis calculates a Style Benchmark for a manager from the manager’s return series and the return series of the indices that are to be used in the Style Benchmark. Thus, we are given:

Style Analysis

Most managers have an investment philosophy that leads to a process for building portfolios. That process causes the portfolio’s returns to behave in a certain way. This behavior is what we call style. There are two ways to determine a manager's style of investing, holdings-based style analysis or returns-based style analysis. We believe that returns-based style analysis is best and explain why in this article.
 
 

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