Actively Managed ETFs: A Performance Evaluation

Gerasimos Georgiou Rompotis ()
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Gerasimos Georgiou Rompotis: Department of Economics, National and Kapodistrian University of Athens, Greece.

Capital Markets Review, 2022, vol. 30, issue 2, 39-61

Abstract: Research Question: The current study examines whether actively managed Exchange Traded Funds (ETFs) in the United States can beat the market. The market timing skills of ETF managers are evaluated too. Motivation: This study has been motivated by the recent increased interest of investors in actively managed ETFs. This interest has been answered by the creators of active ETFs via the launch of several of such products over the last couple of years. As a result, significant money has flown into active ETFs during the last two years, and especially in 2021. Idea: In other words, by examining the latest return data of active ETFs, we try to confirm whether the recent growth in the active ETF market has been driven by material performance records of these funds. Data: The performance of 50 U.S. equity actively managed ETFs is examined over the period 1/1/2018 - 31/12/2021. Method/Tools: Standard methodology including single-factor market model and the Fama-French-Carhart four- and six-factor models is used. Findings: The findings are in line with previous evidence in the literature. Active ETFs fail to achieve any material above market return. In addition, it is shown that the Fama-French-Carhart factors are material in explaining the performance of the examined ETFs. Finally, the managers of active ETFs do not seem to possess any superior market timing skills. Contributions: When it comes to the contribution of this study, we note that we use the most recent data than any other known study in the literature. Moreover, based on methodology found in the literature on traditional mutual funds, we consider several factors in assessing the performance of active ETFs than just the market index, which is frequently the case in similar studies. Finally, market timing skills are assessed via an enhanced set of regression models. All the above enhance our knowledge about the failure of active ETFs to beat the market and to compete their passive peers.

Keywords: ETFs; active management; performance; market timing. (search for similar items in EconPapers)
JEL-codes: G11 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:mfa:journl:v:30:y:2022:i:2:p:39-61

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