Abstract

http://ssrn.com/abstract=2558724
 
 

Citations (2)



 


 



Indexing and Active Fund Management: International Evidence


Martijn Cremers


University of Notre Dame

Miguel A. Ferreira


Nova School of Business and Economics; European Corporate Governance Institute (ECGI)

Pedro P. Matos


University of Virginia - Darden School of Business; European Corporate Governance Institute (ECGI)

Laura T. Starks


University of Texas at Austin - Department of Finance

February 1, 2015

Journal of Financial Economics (JFE), Forthcoming
Darden Business School Working Paper No. 2558724

Abstract:     
We examine the relation between indexing and active management in the mutual fund industry worldwide. Explicit indexing and closet indexing by active funds are associated with countries’ regulatory and financial market environments. We find that actively managed funds are more active and charge lower fees when they face more competitive pressure from low-cost explicitly indexed funds. A quasi-natural experiment using the exogenous variation in indexed funds generated by the passage of pension laws supports a causal interpretation of the results. Moreover, the average alpha generated by active management is higher in countries with more explicit indexing and lower in countries with more closet indexing. Overall, our evidence suggests that explicit indexing improves competition in the mutual fund industry.

Number of Pages in PDF File: 73

Keywords: Mutual funds, Active management, Index funds, Exchange-traded funds, Competition, Fees, Performance

JEL Classification: G15, G18, G23


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Date posted: February 3, 2015  

Suggested Citation

Cremers, Martijn and Ferreira, Miguel A. and Matos, Pedro P. and Starks, Laura T., Indexing and Active Fund Management: International Evidence (February 1, 2015). Journal of Financial Economics (JFE), Forthcoming; Darden Business School Working Paper No. 2558724. Available at SSRN: http://ssrn.com/abstract=2558724

Contact Information

K. J. Martijn Cremers
University of Notre Dame ( email )
P.O. Box 399
Notre Dame, IN 46556-0399
United States
Miguel Almeida Ferreira (Contact Author)
Nova School of Business and Economics ( email )
Campus de Campolide
Lisbon, 1099-032
Portugal
European Corporate Governance Institute (ECGI) ( email )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
Pedro P. Matos
University of Virginia - Darden School of Business ( email )
University of Virginia
P.O. Box 6550
Charlottesville, VA 22906-6550
United States
European Corporate Governance Institute (ECGI) ( email )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
Laura T. Starks
University of Texas at Austin - Department of Finance ( email )
Red McCombs School of Business
Austin, TX 78712
United States
512-471-5899 (Phone)
512-471-5073 (Fax)

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