14 Pages Posted: 22 Apr 2015 Last revised: 15 Jan 2016
Date Written: April 21, 2015
We investigate Active Share, a measure meant to determine the level of active management in investment portfolios. Using the same sample as Cremers and Petajisto (2009) and Petajisto (2013) we find that Active Share correlates with benchmark returns, but does not predict actual fund returns; within individual benchmarks, it is as likely to correlate positively with performance as it is to correlate negatively. Our findings do not support an emphasis on Active Share as a manager selection tool or an appropriate guideline for institutional portfolios.
Keywords: active share, mutual funds
JEL Classification: G10, G14, G20, G23
Suggested Citation: Suggested Citation
Frazzini, Andrea and Friedman, Jacques and Pomorski, Lukasz, Deactivating Active Share (April 21, 2015). Financial Analysts Journal, vol. 72, no. 2 (March/April 2016). Available at SSRN: https://ssrn.com/abstract=2597122 or http://dx.doi.org/10.2139/ssrn.2597122
By Andrew Ang