Patient capital outperformance: The investment skill of high active share managers who trade infrequently
Martijn Cremers and
Ankur Pareek ()
Journal of Financial Economics, 2016, vol. 122, issue 2, 288-306
Among high active share portfolios—whose holdings differ substantially from their benchmark—only those with patient investment strategies (with holding durations of over two years) on average outperform, over 2% per year. Funds trading frequently generally underperform, including those with high active share. Among patient funds, separating closet index from high active share funds matters, as low active share funds on average underperform even with patient strategies. Our results suggest that U.S. equity markets provide opportunities for longer-term active managers, perhaps because of the limited arbitrage capital devoted to patient and active investment strategies.
JEL-codes: G12 G24 (search for similar items in EconPapers)
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