Active Management in Mostly Efficient Markets

Posted: 20 Oct 2011

See all articles by Robert Jones

Robert Jones

Arwen Advisors

Russ Wermers

University of Maryland - Robert H. Smith School of Business

Date Written: September 1, 2011

Abstract

This survey of the academic literature on the value of active management shows that the average active manager does not outperform, but that a significant minority of active managers do add value. Further, academic studies suggest that investors may be able to identify superior active managers (SAMs), in advance, by using public information. Investors who can identify SAMs should be able to improve their overall Sharpe ratio by including a meaningful exposure to active strategies.

Keywords: mutual funds, active management, performance evaluation

JEL Classification: G14, G23

Suggested Citation

Jones, Robert and Wermers, Russell R., Active Management in Mostly Efficient Markets (September 1, 2011). Financial Analysts Journal, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1946069

Robert Jones

Arwen Advisors ( email )

211 Warren Street
Newark, NJ 07103
United States

Russell R. Wermers (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

Department of Finance
College Park, MD 20742-1815
United States
301-405-0572 (Phone)
301-405-0359 (Fax)

HOME PAGE: http://www.rhsmith.umd.edu/finance/rwermers/

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