When Does Cap-Weighting Outperform? Factor-Based Explanations
Roger G Clarke (Ensign Peak Advisors), et al.
May 1, 2018
Equity mutual fund performance can be partially explained by commonly-followed equity market factors, and the proposition that fund managers in the aggregate have more equally-weighted positions that the capitalization weighted market. Currently, the aggregate mutual fund’s active return is positively associated with the performance of pure Momentum, Small Size, and Profitability factors, and negatively associated with the performance of pure Value and Low Beta factors.
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