Managerial Activeness and Mutual Fund Performance

Hitesh Doshi, Redouane Elkamhi and Mikhail Simutin

The Review of Asset Pricing Studies, 2015, vol. 5, issue 2, 156-184

Abstract: A closet indexer is more likely to meet a value-weighted investment benchmark by value weighting the portfolio. Following this intuition, we introduce a simple measure of active management, the absolute difference between the value weights and actual weights held by a fund, summed across its holdings. This proxy captures managerial skill: active funds outperform passive ones by 2.5% annually. Compared with known measures of skill, our proxy robustly predicts fund flows, asset growth, factor-adjusted performance, and value added. Its predictive ability is orthogonal to that of other measures and is robust to controlling for volatility timing, past performance, and style.

JEL-codes: G10 G12 G14 G20 G23 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (30)

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Persistent link: https://EconPapers.repec.org/RePEc:oup:rasset:v:5:y:2015:i:2:p:156-184.

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