Regarding the quantification of fund style drift, in the process of fund investment operation and management, the so-called "style drift" phenomenon often occurs, that is, the fund investment style changes in the crisis return style.

Here I would like to share with you some quantifications about fund style drift. I hope it can help you! What is style drift? In the process of fund investment operation and management, the so-called "style drift" phenomenon often occurs, that is, the fund investment style is different from the crisis return style.

Changes have occurred, such as drifting from low-risk hybrid funds to high-risk stock funds.

Style drift refers to the phenomenon that the actual investment style of a fund deviates from the investment style declared in the fund prospectus during a specific investigation period.

Fund style drift and cash flow fluctuations It is generally believed that fund style drift reflects changes in fund investment strategies, and its purpose is probably to obtain short-term excess returns.

However, some scholars hold different views. Kim et al., Swinkels et al. believe that fund style drift may also be a by-product of changes in investment decisions, or the impact of capital inflows on fund operations and management.

Through empirical research, Cooper et al. have shown that funds can attract new capital inflows to a certain extent by changing their names.

Gallo et al. attributed fund style drift to changes in fund managers.

Chen et al. studied the cyclical performance patterns of various style asset returns and concluded that if a fund can timely grasp the rotation rhythm of style assets and adopt corresponding investment strategies, although this will cause fund style drift, it will not pursue higher investment returns.

Judging from the purpose, this behavior is also reasonable.

Quantification of Fund Style Drift So far, the academic community has not yet formed a complete understanding of the definition of fund investment style; different definitions of investment styles have formed different ways of quantifying fund style drift.

Buetow et al. believe that although the style identification method based on fund returns has a certain degree of robustness, it still faces the linearity problem that exists between various benchmark indexes.

Chan et al. used two indicators including size and book-to-market ratio to construct a three-factor model, and used this model to measure the consistency of the fund's investment style; Wermers compared the investment behavior of active funds and passive funds and found that the fund's active

Sharp-type trading behavior has led to fund style drift; Amenc: et al. proposed that it can be based on Sharp's trading behavior.

The F statistics value of the weak style model and the Chow test are used to analyze whether style drift occurs in the fund in two connected periods.

Among these ways to quantify fund style drift, the more mature one is the SDS indicator method proposed by Idzorek et al.

This method measures the degree of style drift of the fund by calculating the overall change rate of the fund's investment portfolio structure within a certain period.

This indicator is based on the regression parameters of the Sharpe strong style model. From the calculation principle, the greater the SDS value, the greater the degree of style drift of the fund.

Carhar, Brown et al., and Bar et al. successively used the style drift quantification method based on the Carhart four-factor model. This method mainly judges whether the fund has drifted by comprehensively examining the error terms and changes in the goodness of fit of the four-factor model, thus to a certain extent.

It plays the role of quantifying fund style drift.