Returns-based style analysis (RBSA) is a statistical technique used in finance to deconstruct the returns of investment strategies using a variety of explanatory variables.
The model results in a strategy's exposures to asset classes or other factors, interpreted as a measure of a fund or portfolio manager's investment style.
[1] Under the name RBSA, this model was made available in commercial software soon after and retains a consistent presence in mutual fund analysis reporting.
As the investment community has expanded beyond security selection to the embrace of asset allocation as the critical driver of performance, additional papers and studies further supported the concept of using RBSA in conjunction with holdings-based analysis.
[4] Application of the model involves repeated regressions over overlapping windows to compute an alpha and vector of betas for each, resulting in a statistical picture of a manager's style.
These methods still require assumed restrictions on the evolution of exposures, such as a return to normality assumption,[6] or a fixed turnover parameter such as in Dynamic Style Analysis.