Active Share and Emerging Market Equity Funds

36 Pages Posted: 14 Apr 2016 Last revised: 29 Sep 2017

See all articles by Aron A. Gottesman

Aron A. Gottesman

Pace University - Lubin School of Business - Department of Finance and Economics

Matthew R. Morey

Pace University - Lubin School of Business - Department of Finance and Economics

Multiple version iconThere are 2 versions of this paper

Date Written: February 27, 2017

Abstract

This paper represents the first specific attempt in the literature to examine the relationship between active share and emerging market equity fund performance. Using a sample of U.S. based diversified emerging market equity funds whose prospectus benchmark is the MSCI emerging market equity index, we find a positive and significant relationship between the average level of a fund’s active share and fund performance. Funds that are more active have significantly better performance than other funds. We find this result to be robust with three different performance metrics over the period 2009-2014. We also find evidence that highly active funds that keep their level of activeness consistent over time have significantly better performance than do funds that change their level of activeness. Finally, we document that a significant number of diversified emerging market funds were closet indexing over the period 2009-2014, but that the percentage of funds that pursue this strategy has been declining.

Keywords: Active share, emerging markets, mutual funds, fund performance

JEL Classification: G15, G23

Suggested Citation

Gottesman, Aron A. and Morey, Matthew R., Active Share and Emerging Market Equity Funds (February 27, 2017). Available at SSRN: https://ssrn.com/abstract=2761660 or http://dx.doi.org/10.2139/ssrn.2761660

Aron A. Gottesman

Pace University - Lubin School of Business - Department of Finance and Economics ( email )

One Pace Plaza
New York, NY 10038
United States
212-346-1912 (Phone)
212-346-1573 (Fax)

Matthew R. Morey (Contact Author)

Pace University - Lubin School of Business - Department of Finance and Economics ( email )

One Pace Plaza
New York, NY 10038-1502
United States
212-618-6471 (Phone)

HOME PAGE: http://webpage.pace.edu/mmorey/

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