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The equal-weight tilt in managed portfolios

Hanke, B., Keswani, A. ORCID: 0000-0001-9096-7677, Quigley, G., Stolin, D. and Zagonov, M. (2019). The equal-weight tilt in managed portfolios. Economics Letters, 182, pp. 59-63. doi: 10.1016/j.econlet.2019.06.003

Abstract

Active portfolios can be more concentrated or more diversified than the market portfolio. In the latter case, the result is likely to be a tilt toward equal weights, which has been shown to have a systematic impact on portfolio returns. To capture this tilt, we use the difference between returns on equal-weighted and value-weighted portfolios for the relevant universe; we call this difference Equal-Minus-Value, or EMV. Despite EMV’s simplicity, its ability to explain mutual fund returns compares very favorably with that of the most popular performance evaluation factors. We therefore argue that EMV should be used in performance evaluation of broad market equity portfolios.

Publication Type: Article
Additional Information: © 2018 Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/
Publisher Keywords: Asset management, Mutual funds, Performance evaluation
Subjects: H Social Sciences > HG Finance
Departments: Cass Business School > Finance
URI: http://openaccess.city.ac.uk/id/eprint/22338
[img] Text - Accepted Version
This document is not freely accessible until 8 December 2020 due to copyright restrictions.
Available under License Creative Commons Attribution Non-commercial No Derivatives.

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