Active Versus Passive Investing - An Analysis of UK Equity Markets, 1991-2005

Edel Barnes and M. Scott
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Edel Barnes: National University of Ireland, Cork, O’Rahilly Building, UCC, College Road, Cork, Ireland
M. Scott: National University of Ireland, Cork, O’Rahilly Building, UCC, College Road, Cork, Ireland

JRFM, 2008, vol. 1, issue 1, 1-29

Abstract: This study examines the pattern of active versus passive trading in UK equities over the period 1991-2005. We describe a metric to analyse trading activity and volumes in the UK FTSE350 and AIM markets, with emphasis on industrial and size-based effects. Our findings indicate that active stock picking has been consistently declining in the UK market over the period studied for all markets, size quintiles and in virtually every industrial sector. Moreover, trading patterns reveal a pronounced size effect with significantly less stock picking in larger capitalisation stocks vis-à-vis smaller stocks. Patterns of investment in the AIM suggest an increase in index trading over time but higher overall levels of stock picking relative to the FTSE350 list.

Keywords: n/a (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2008
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