Abstract
This study is the first to combine returns-based (RBS) and characteristics-based (CBS) style analysis into a single style analysis model. We address the issue of whether RBS and CBS analysis are complementary. Out-of-sample tests confirmed two things: membership of style groups explains a significant degree of cross-sectional performance of mutual funds, and the cumulative effect of combining BFI (Best Fit Index) and CBS analysis significantly improves on the CBS and BFI models in isolation. The ex post explanatory power of the combined model is greater than the individual parts.