Deconstructing Active Share

44 Pages Posted: 7 Jan 2015 Last revised: 29 Sep 2015

See all articles by Jon A. Fulkerson

Jon A. Fulkerson

University of Dayton

Timothy B. Riley

University of Arkansas - Department of Finance

Date Written: September 28, 2015


We deconstruct the active share measure proposed by Cremers and Petajisto (2009) and find two-thirds of the outperformance of high active share mutual funds can be attributed to the ability of those funds to select out-of-benchmark stocks. However, that ability is limited to high active share funds that use out-of-benchmark positions sparingly. Funds with large out-of-benchmark positions show little ability to select out-of-benchmark stocks. Our results suggest that the best active funds generally stay within their benchmark, deviating only for particularly good purchases, and that conditioning on the amount of out-of-benchmark investing significantly increases the predictive power of active share.

Keywords: Mutual Funds, Active Share, Performance, Alpha, Return, Benchmark, Index, Skill

JEL Classification: G11, G20

Suggested Citation

Fulkerson, Jon A. and Riley, Timothy Brandon, Deconstructing Active Share (September 28, 2015). Available at SSRN: or

Jon A. Fulkerson

University of Dayton ( email )

300 College Park
Dayton, OH 45469
United States

Timothy Brandon Riley (Contact Author)

University of Arkansas - Department of Finance ( email )

Fayetteville, AR 72701
United States

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