Investment Styles and Performance Persistence of Equity Funds in Korea Using Sharpe`s style analysis

Kang, Jang Koo; Lee, Chang Jun

Korean Journal of Financial Studies 2010;39(2):307-339.
Published online June 30, 2010.

Jang Koo Kang, Chang Jun Lee

Sharpe의 방법론을 이용한 한국 주식형펀드의 운용스타일 및 성과분석

강장구, 이창준

Abstract

This paper investigates the investment styles and performance persistence of equity funds in Korea using Sharpe (1992)`s style analysis methodology. Unlike the regression analysis, both the portfolio and positivity constraints are imposed in style analysis proposed by Sharpe. The empirical findings documented in this paper are as follows: First, relative to the market capitalization of stocks in each style portfolio, equity funds in Korea have high exposure to the small and value stocks, though the absolute exposure of large and growth stocks are higher than that of small and value stocks. Second, the investment styles are time-varying. Especially, funds that invest in small stocks have increased over the last seven years. Third, using the two style benchmark portfolios, equity funds create the abnormal annual return of 2.60% and 3.12%, respectively. Finally, outperformance of equity funds in Korea is confirmed using the conditional performance measurement. For robustness check, we employ the famous Fama and French three-factor model (1993) and Carhart four-factor model (1997) as our performance measure and the outperformance is still present.

Key Words: 성과지속성,성과측정,스타일 지속성,운용스타일분석,Investment Styles,Performance Measurement,Performance Persistence,Sharpe`s Style Analysis,Sharpe의 스타일분석,Shifts in Investment Styles