The Review of Asset Pricing Studies Vol. 5 No. 2 2015
Managerial Activeness and Mutual Fund Performance
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.
- DOI
- 10.1093/rapstu/rav005
- Volume
- 5
- Issue
- 2
- Pages
- 156-184
- Language
- en
- Sources
- crossref bibtex:phds-export.bib openalex