style fit

style fit = R^2?

i think so

Yes and the 1- R^2 is that not explained by the style (IE the manager’s active return).

Cool haven’t seen that before!

Yes, on 2006/2007 exam (can’t remember exactly), I said that R^2=88% indicated a passive manager. However, I got it wrong, a 88% R^2 indicates the mananger is an active manager because 12% of his return is unexplained.

ws Wrote: ------------------------------------------------------- > Yes, on 2006/2007 exam (can’t remember exactly), I > said that R^2=88% indicated a passive manager. > However, I got it wrong, a 88% R^2 indicates the > mananger is an active manager because 12% of his > return is unexplained. I said it is pasive too… cause i didnt even notice 88% figure lol :slight_smile: I need to read questions more carefuly

Was it covered in this years curriculum?

I think this is part fo the Quant section from last year…but still easy enough for points

Yes… that’s L2 material… easy enough though.

pimp Wrote: ------------------------------------------------------- > Was it covered in this years curriculum? It’s covered in SS 10 under equity PM style analysis.

yep, and the formula is selection = 1 - style fit where, style fit = R^2 you get R^2 by performing a regression for returns-based style analysis where you regress the returns of your portfolio on the benchmark that supposed to match your style