Sharpe's Return-Based Style Analysis is an interesting theory but flawed in practice when working with long-short funds or funds that are changing strategies over shorter periods of time due to the limits of linear regression.
I have found a few papers looking into improvements to make the calculations more robust Markov, Muchnik, Krasotkina, Mottl (2006) seems fairly reasonable for instance. However, they commonly only deal with the time-varying beta issue.
I was wondering if there was anyone out there doing work on the limitations of linear regression for style analysis. I particular more robust variance-covariance matrices for the minimization of the objective function.