Active Share and Mutual Fund Performance. Antti Petajisto Antti Petajisto is a researcher and portfolio manager at quantPORT, a systematic multi-strategy. A mutual fund combines active positions with a passive position in the benchmark index, which can make the Active Share and Mutual Fund Performance. The data file shows the Active Share of U.S. equity mutual funds, computed over the original factors in performance evaluation applications (see the paper for .
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We examine the relation between indexing and active management in the mutual fund industry worldwide. We build a model to investigate the behavior of the index turnover cost and the portfolio performance of a mechanical index fund under a market-cap rule, an exogenous random rule, and a deterministic rule.
Petajisto / Data
To control for stale pricing of the underlying assets, I introduce a novel approach using the cross-section of prices on a group of similar ETFs. I find that over my sample period until the end ofthe most active stock pickers have outperformed their benchmark indices even after fees and transaction costs. You should think of the above data files as mostly an extension of the data used by Cremers and Petajistoadding another six years and containing a few methodological tweaks.
March published version working paper. A comparison of hedge funds and mutual funds J Keppo, A Petajisto. Because the global earnings quality portfolio has a negative correlation with a value portfolio, an investor wishing to invest in both exposures can achieve significant diversification benefits.
We conclude by discussing potential adjustments to funv fund disclosures that could help investors identify closet index funds. Active Share, tracking error, closet indexing. Management fee, incentive fee, hedge fund, mutual fund.
Email address for updates. The system can’t perform the operation now. Our results suggest that U. I sort domestic all-equity mutual funds into different categories of active management using Active Share and tracking error. October published version working paper.
The prices of exchange-traded funds can deviate significantly from their net asset values, on average fluctuating within a band of about basis points, in spite of the arbitrage mechanism that allows authorized participants to create and redeem shares for the underlying portfolios. Different index rules can produce different index premia due to the different frequency and criteria of updating.
Antti Petajisto – Google Scholar Citations
Among patient funds, separating closet index from high Active Share funds matters, as low Active Share petajisgo on average underperform even with patient strategies. This result holds both in the overall sample as well as in the more recent time period since Inefficiencies in the pricing of exchange-traded funds A Petajisto Financial Analysts Journal 73 1, Finally, we show that our findings are quite robust with respect to a jump risk in the hedge fund returns.
If you agree to the above, you may proceed to download the following files:. In equilibrium the fee charged by active managers has to equal the before-fee alpha they earn; anti endogenously determines the amount of active capital and the slopes of demand curves. July published version working petaiisto.
Cremers, Petajisto, and Zitzewitz build on the contribution of Fama and French by proposing similar but slightly revised versions of the factors. Journal of Alternative Investments, 17 2: The same long-term performance patterns held up over the financial crisis, and they also hold within market cap styles.
Active Share and Mutual Fund Performance. A mutual fund combines active positions with a passive position in the benchmark index, which can make the active positions expensive. The deviations are larger in funds holding international or illiquid securities where net asset values are most difficult to determine in real time.
In contrast, closet indexers or funds focusing on factor bets have lost to their benchmarks after fees. We find that antfi rational anticipation of future index composition reflected petajiisto prices today eliminates any first-order differences in index fund performance across the three index rules. As the index investors become a large part of the market, the non-index investors become less diversified, and this induces hedging motives which hurt the index investors especially under a market-cap rule.
Demand curves for stocks, delegated portfolio management, equilibrium mispricing, index premium. Earnings quality, value, international, accruals.