The Review of Asset Pricing Studies Vol. 11 No. 4 2021
A Panel Regression Approach to Holdings-Based Fund Performance Measures
open access
Abstract
Portfolio performance measures using holdings data are panel regressions. The returns of a fund’s stocks are regressed on its lagged portfolio weights. Stock fixed effects isolate average performance from time-series predictive ability. Control variables condition for fund performance on the characteristics of the stocks held. The long-term performance of average holdings drives some of the classical measures, while predictive ability drives others. A “buy-and-hold drift,” where portfolio weights increase over time in the higher alpha stocks, affects performance measures. Investor flows respond to average performance net of the buy-and-hold drift.
- DOI
- 10.1093/rapstu/raab007
- Volume
- 11
- Issue
- 4
- Pages
- 695-734
- Language
- en
- Sources
- openalex bibtex:phds-export.bib crossref