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Abstract
We show how active share can be decomposed into segment and stock-specific exposures to create an active share risk profile. The method is demonstrated for global equity portfolios by attributing active share into contributions from country, sector, stock-specific, and non-equity positions within portfolios. Active share risk profiles can be used to identify the underlying sources of benchmark-relative risk within a portfolio both for a point in time and over time, and to compare the exposures in a portfolio relative to competitors. The method is straightforward to implement and may form a useful part of the toolkit for understanding benchmark-relative risk exposures within actively managed portfolios.
TOPICS: Equity portfolio management, emerging
Key Findings
• Active share can be decomposed into an active share risk profile to help understand the underlying segment and stock-specific risk exposures within a portfolio.
• Active share risk profiles are generated for global equity portfolios based around contributions from country, sector, stock-specific, and non-index exposures. Sources of benchmark-relative risk are isolated at a point in time and over time and comparisons made between portfolios.
• Active share risk profile is straightforward to implement and can form part of the toolkit for understanding how active portfolios invest and what risk exposures they hold.
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Don’t have access? Click here to request a demo
Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
UK: 0207 139 1600