Paper: arXiv 2510.19619

Authors: Rajesh ADJ Jeyaprakash, Senthil Arasu Balasubramanian, Vijay Maddikera

Abstract

Investment style groups investment approaches to predict portfolio return variations. This study examines the relationship between investment style, style consistency, and risk-adjusted returns of Indian equity mutual funds. The methodology involves estimating size and style beta coefficients, identifying breakpoints, analysing investment styles, and assessing risk-shifting intensity. Funds transition across styles over time, reflecting rotation, drift, or strengthening trends. Many Mid Blend funds remain in the same category, while others shift to Large Blend or Mid Value, indicating value-oriented strategies or large-cap exposure. Some funds adopt high-return styles like Small Value and Small Blend, aiming for alpha through small-cap equities. Performance changes following risk structure shifts are analyzed by comparing pre- and post-shift metrics, showing that style adjustments can enhance returns based on market conditions. This study contributes to mutual fund evaluation literature by highlighting the impact of style transitions on returns.

Complexity vs Empirical Score

  • Math Complexity: 4.5/10
  • Empirical Rigor: 7.5/10
  • Quadrant: Street Traders — practical and empirical, lighter on theory

Why this score: The paper employs empirical regression models (e.g., Carhart four-factor) and statistical metrics but is light on dense mathematical derivations, focusing on applied econometrics. It uses a real, multi-year dataset (2006-2023) on Indian funds with detailed methodology for style drift analysis and performance metrics, making it backtest-ready.

Research Flowchart

  flowchart TD
  A["Research Goal<br>Examine relationship between<br>investment style, consistency,<br>and risk-adjusted returns"] --> B["Data Collection<br>Indian Equity Mutual Funds"]
  B --> C["Methodology: Estimation<br>Calculate style & size betas"]
  C --> D["Methodology: Analysis<br>Identify breakpoints &<br>analyze style transitions"]
  D --> E["Computation<br>Compare pre/post-shift metrics<br>Assess risk-shifting intensity"]
  E --> F["Key Findings/Outcomes<br>1. Funds transition styles over time<br>2. Style adjustments enhance returns<br>3. Specific patterns: Mid→Large/Value,<br>Small Cap for alpha"]