How Active is Your Fund Manager? A New Measure That Predicts Performance

Martijn Cremers and Antti Petajisto

Yale School of Management Working Papers from Yale School of Management

Abstract: We introduce a new measure of active portfolio management, Active Share, which represents the share of portfolio holdings that differ from the benchmark index holdings. We compute Active Share for domestic equity mutual funds from 1980 to 2003. We relate Active Share to fund characteristics such as size, expenses, and turnover in the cross-section, and we also examine its evolution over time. Active Share predicts fund performance: funds with the highest Active Share significantly outperform their benchmarks, both before and after expenses, and they exhibit strong performance persistence. Non-index funds with the lowest Active Share underperform their benchmarks.

Keywords: Portfolio management; Active Share; tracking error; closet indexing (search for similar items in EconPapers)
Date: 2006-03-01, Revised 2009-05-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (103)

Downloads: (external link)
https://repec.som.yale.edu/icfpub/publications/2370.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ysm:wpaper:amz2370

Access Statistics for this paper

More papers in Yale School of Management Working Papers from Yale School of Management Contact information at EDIRC.
Bibliographic data for series maintained by ().