EQUITY STYLE CLASSIFICATIONS

The two primary approaches currently in use for style identification and classification are 1) an evaluation of the manager's investment process and equity portfolio characteristics, and 2) return pattern analysis (or correlation analysis). The author makes the case that investment style involves implicit Links between equity characteristics and subsequent returns. Style is of interest not because there is concern with observed past returns, but because the objective is to anticipate future returns. Thus, observations of past performance to classify a manager by style can be misleading.