Returns-based Analysis Research Articles

ESG: Fact vs. Belief

The paper examines the investment proposition of a scoring-based ESG investing in the context of portfolio allocation. We assess the theme on the basic idea of investing, viz: return enhancement and/or diversification. At the same time, the paper also argues on some of the subjective aspects which merit an in-depth discussion and debate. This is a returns-based analysis which compares an off-the-shelf ESG component to the broad market and also examines its impact on its inclusion in a typical balanced portfolio. The analyses show that ESG has not been able to add any returns in absolute terms as well as on a risk-adjusted basis. We also evaluated the ability of ESG to protect on the downside given its claims of providing higher quality tilt. Historical data do not suggest any such benefits and ESG demonstrates similar drawdowns as traditional equities during risk off periods. We, therefore, do not see much merit in following a ratings-based mechanism for ESG investing. Rather, emphasis should be laid on how to engage with and improve a firm come up the ESG spectrum over time and potentially participate in its upside as investors.

Complementary or contradictory? Combining returns-based and characteristics-based investment style analysis

This study is the first to combine returns-based (RBS) and characteristics-based (CBS) style analysis into a single style analysis model. We address the issue of whether RBS and CBS analysis are complementary. Out-of-sample tests confirmed two things: membership of style groups explains a significant degree of cross-sectional performance of mutual funds, and the cumulative effect of combining BFI (Best Fit Index) and CBS analysis significantly improves on the CBS and BFI models in isolation. The ex post explanatory power of the combined model is greater than the individual parts.

Complementary or Contradictory? Combining Returns Based & Characteristics Based Investment Style Analysis

This study is the first to combine returns based (RBS) and characteristics based (CBS) style analysis into a single style analysis model. We address the issue of whether RBS and CBS style analysis complementary. Out of sample tests confirmed two things; membership of style groups explain a significant degree of cross sectional performance of mutual funds and secondly the cumulative effect of combining BFI and CBS analysis significantly improves on the CBS and BFI models in isolation. The ex post explanatory power of the combined model is greater than the individual parts.

Mutual Funds: Portfolio Structures, Analysis, Management, and Stewardship

Mutual Funds: Portfolio Structures, Analysis, Management, and Stewardship