Investments (4-factor model)

SMB

Size factor (small-cap stock returns minus large-cap stock returns)

HML

Value factor (high B/M stock returns minus low B/M stock returns)

UMD

Momentum factor (past 12-month winners’ returns minus past 12-month losers’ returns)

Positive and significant SMB coefficient

Fund’s returns move like small-cap stocks; manager likely invests in small companies

Negative and significant SMB coefficient

Fund’s returns move like large-cap stocks; manager likely invests in large companies

Positive and significant HML coefficient

Fund’s returns move like value stocks; manager likely invests in high B/M (value) stocks

Negative and significant HML coefficient

Fund’s returns move like growth stocks; manager likely invests in low B/M (growth) stocks

Positive and significant UMD coefficient

Fund’s returns move like past winners; manager likely follows a momentum strategy (buys recent winners)

Negative and significant UMD coefficient

Fund’s returns move like past losers; manager likely follows a contrarian strategy (buys recent losers)