RonBoyd
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SSRN-Active Share and Mutual Fund Performance by Antti Petajisto
Abstract:
[FONT=Myriad Roman, Arial, Helvetica, Sans-serif;]I sort domestic all-equity mutual funds into different categories of active management using Active Share and tracking error, as suggested by Cremers and Petajisto (2009). I find that over my sample period until the end of 2009, the most active stock pickers have outperformed their benchmark indices even after fees and transaction costs. In contrast, closet indexers or funds focusing on factor bets have lost to their benchmarks after fees. The same long-term performance patterns held up over the 2008-2009 financial crisis. Closet indexing has become more popular after market volatility started to increase in 2007.
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