Active Share and Mutual Fund Performance. Antti Petajisto Antti Petajisto is a researcher and portfolio manager at quantPORT, a systematic multi-strategy. A mutual fund combines active positions with a passive position in the benchmark index, which can make the Active Share and Mutual Fund Performance. The data file shows the Active Share of U.S. equity mutual funds, computed over the original factors in performance evaluation applications (see the paper for .
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Active Share and Mutual Fund Performance. How active is your fund manager? These funds do not seem to take increased risk and their outperformance cannot be explained by fund size alone, though on average they are smaller funds.
The time period is Their combined citations are counted only for the first article. Active and passive portfolio management mutual funds hedge funds ETFs behavioral finance.
We find that actively managed funds are more active and charge lower fees when they face more competitive pressure from low-cost explicitly indexed funds. July joint with Martijn Cremers and Eric Zitzewitz. Review perflrmance Financial Studies, 22 9: Second, the implied price elasticity of demand increases with firm size and decreases with idiosyncratic risk, supporting theoretical predictions.
Active Share, tracking error, closet indexing. An earlier and more comprehensive version, including results on endogeneously arising institutions and optimal institutional structure pdf file. It describes the petajjsto of portfolio holdings that differ from the benchmark index. I sort domestic all-equity mutual funds into different categories of active management using Active Share and tracking error.
November joint with Max Kozlov. Email address for updates. To quantify active portfolio management, we introduce prformance new measure we label Active Share.
Related video appearance on CNBC link. Representative agent models are inconsistent with existing empirical evidence for steep demand curves for individual stocks. We apply this approach to the universe of all-equity mutual funds to characterize how much and what type of active management they practice. We introduce a new measure of active portfolio management, Active Share, which represents the share of portfolio holdings that differ from the benchmark index holdings. Inefficiencies in the pricing of exchange-traded funds A Petajisto Financial Analysts Journal 73 1, muutal Funds that are marketed as active vary substantially in the degree to which their portfolio holdings actually differ from the holdings of passive index funds.
Journal of Financial and Quantitative Analysis, 44 5: What is the true cost of active management?
The system can’t perform the operation now. This “Cited by” count includes citations to the following articles in Scholar.
For index investors this creates a recurring cost: A quasi-natural experiment using the exogenous variation in indexed funds generated by the passage of pension laws supports a causal interpretation of the results. Active Share predicts fund performance: We determine the type of active management muutal a portfolio by measuring it in two dimensions using both Active Share and tracking error volatility.
Earnings quality, value, international, accruals. January published version working paper.
Petajisto / Data
To control for stale pricing of the underlying assets, I introduce a novel approach using the cross-section of prices on a group of similar ETFs. Non-index funds with the lowest Active Share underperform their benchmarks. We conclude by discussing potential adjustments to mutual fund disclosures that could help investors identify closet index funds.
We examine the relation between indexing and active management in the mutual fund industry worldwide. Who Has Been Buying U. Boucher, Christopher, and Bertrand Maillet: You should think of the above data files as mostly an extension of the data used by Cremers and Petajistoadding another six years and containing a few methodological tweaks.
Fama and French introduced stock market factors to control for the size effect and the value effect. Should benchmark indices have alpha?
We build a model to investigate the behavior of the index turnover cost and the portfolio performance of a mechanical index fund under a market-cap rule, an exogenous random rule, and a deterministic rule. Among patient funds, separating closet index from high Active Share funds matters, as low Active Share funds on average underperform even with patient strategies.
We show why and how to adjust the expense ratio for the level of Active Share and the cost of investing in the benchmark. Empirical tests pdf file and a more elaborate model pdf file.
The benchmark index is the official benchmark index disclosed in the prospectus. Journal of Alternative Investments, 17 2: