Which of the following is an advantage of holdings-based style analysis?

Holdings-based style analysis offers the advantage of capturing changes in investment style more quickly than returns-based methods. This approach examines the actual securities held within a portfolio, providing insights into the current investment strategies employed by the portfolio manager. By analyzing the specific holdings, this method can quickly reflect any structural shifts in the underlying investment philosophy or asset allocation of the portfolio, whereas returns-based methods rely on historical performance data, which may not respond as swiftly to recent changes.

The ability to detect rapid changes in style is crucial for investors and analysts who may want to ensure that the portfolio aligns with their investment objectives or risk tolerance. This is particularly beneficial in dynamic markets where styles may shift quickly due to economic or sector developments.

Other options lack this immediacy in capturing shifts. For example, while characterizing the entire portfolio is important, it does not specifically speak to the speed at which style changes are detected. Cost and data input requirements may vary significantly based on the analysis approach but do not directly address the timeliness of style adjustment detection. Thus, the advantage of speed in recognizing style change is a key strength of holdings-based style analysis.