The investment fund replication techniques and related financial product have been developed in recent years. It is understood that investing in the replicated fund can help investors gain similar returns without suffering drawbacks of the target fund. However, it is difficult to produce...

We investigate the relationship between a mutual fund's variation in factor exposures and its future performance. Using a dynamic state space version of Carhart (1997)'s four factor model to capture factor variation, we find that funds with volatile factor exposures underperform funds with...