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bdrift: Beta Drift Analysis

Beta drift poses a serious challenge to asset managers and financial researchers. Beta drift causes problems in asset pricing models and can have serious ramifications for hedging attempts. Providing users with a tool that allows them to quantify beta drift and form educated opinions about it is the primary purpose of this package. This package contains the BDA() function that performs a beta drift analysis, typically for multi-factor asset pricing models. The BDA() function tests the underlying model parameters for drift across time, drift across model horizon, and applies a jackknife procedure to the baseline model. This allows the users to draw conclusions about the stability of model parameters or make inferences about the behavior of funds. For example, the drift of parameters for active funds could be interpreted as implicit style drift or, in the case of passive funds, management's inability to track a benchmark completely.

bdrift.pdf