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Deactivating Active Share

14 Pages Posted: 22 Apr 2015 Last revised: 15 Jan 2016

Andrea Frazzini

AQR Capital Management, LLC

Jacques Friedman

AQR Capital Management, LLC

Lukasz Pomorski

AQR Capital Management, LLC

Date Written: April 21, 2015

Abstract

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

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

Andrea Frazzini

AQR Capital Management, LLC ( email )

Two Greenwich Plaza, 3rd Floor
Greenwich, CT 06830
United States
203-742-3894 (Phone)
203-742-3394 (Fax)

HOME PAGE: http://www.econ.yale.edu/~af227/

Jacques Friedman

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

Lukasz Pomorski (Contact Author)

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

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