The role of passive effects in the relationship between active management and short-term performance: Evidence from mutual fund portfolio holdings
comunitat-uji-handle:10234/9
comunitat-uji-handle2:10234/8648
comunitat-uji-handle3:10234/8649
comunitat-uji-handle4:
INVESTIGACIONMetadata
Title
The role of passive effects in the relationship between active management and short-term performance: Evidence from mutual fund portfolio holdingsDate
2024Publisher
ElsevierISSN
1544-6123; 1544-6131Bibliographic citation
MATALLÍN-SÁEZ, Juan Carlos; DE MINGO-LÓPEZ, Diego Víctor. The role of passive effects in the relationship between active management and short-term performance: Evidence from mutual fund portfolio holdings. Finance Research Letters, 2024, 105107.Type
info:eu-repo/semantics/articleVersion
info:eu-repo/semantics/publishedVersionSubject
Abstract
This study proposes a new method to measure active management in a given quarter based on the
correlation between fund returns and the returns of a passively-managed synthetic portfolio
emulating fund portfolio ... [+]
This study proposes a new method to measure active management in a given quarter based on the
correlation between fund returns and the returns of a passively-managed synthetic portfolio
emulating fund portfolio holdings. A lower level of correlation indicates higher levels of active
management since the behaviour of actual fund daily returns deviates to a greater extent from
those that the fund would have obtained in the case of no trading activity. Abnormal fund performance is measured as the difference between fund and synthetic portfolio alphas to distinguish
the value added by active management during a quarter from that obtained passively by fund
holdings. Thus, each synthetic portfolio serves as an endogenous benchmark to assess active
management and performance of the fund it emulates, while avoiding biases due to passive effects. In line with previous literature, the aggregate abnormal performance is negative. Moreover,
results suggest that active management due to stock trading activity is lower in more volatile
periods, and relates negatively to abnormal fund performance in the short-term. [-]
Is part of
Finance Research Letters, 2024, 105107Funder Name
Universitat Jaume I | Agencia Estatal de Investigación, Ministerio de Ciencia e Innovación
Project code
UJI-B2020-48 | GACUJI/2021/09 | PID2020- 115450GB-I00
Investigation project
MCIN/AEI/10.13039/501100011033Rights
info:eu-repo/semantics/openAccess
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- COFIN_Articles [218]