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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: Bayes Business School > Finance
Date available in CRO: 12 Jun 2019 13:35
Date deposited: 12 June 2019
Date of acceptance: 3 June 2019
Date of first online publication: 8 June 2019
URI: https://openaccess.city.ac.uk/id/eprint/22338
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