Is Active Investing a Zero-Sum Game?

59 Pages Posted: 6 Feb 2018 Last revised: 1 Oct 2018

See all articles by Markus Leippold

Markus Leippold

University of Zurich - Department of Banking and Finance; University of Zurich - Faculty of Economics, Business Administration and Information Technology

Roger Rüegg

University of Zurich - Department of Banking and Finance; Cantonal Bank of Zurich

Date Written: September 16, 2018

Abstract

To study the hypothesis whether active investing is a zero-sum game, we analyze the alpha of active and index mutual funds from a global sample of more than 60,000 equity and fixed income funds. Using a new robust statistical test, we cannot reject this hypothesis for the vast majority of investment categories. We also find that the average active fund has less exposure to traditional risk factors, but higher sensitivity to alternative risk premia. Fund persistence and the impact of size and fees adds further support to the hypothesis.

Keywords: active investing, index investing, mutual funds, robust alpha test

JEL Classification: C12, G10, G11, G20, G23

Suggested Citation

Leippold, Markus and Rüegg, Roger, Is Active Investing a Zero-Sum Game? (September 16, 2018). Available at SSRN: https://ssrn.com/abstract=3107904 or http://dx.doi.org/10.2139/ssrn.3107904

Markus Leippold (Contact Author)

University of Zurich - Department of Banking and Finance ( email )

Plattenstrasse 14
Zürich, 8032
Switzerland

University of Zurich - Faculty of Economics, Business Administration and Information Technology ( email )

Plattenstrasse 14
Zürich, 8032
Switzerland

Roger Rüegg

University of Zurich - Department of Banking and Finance ( email )

Switzerland

Cantonal Bank of Zurich ( email )

Josefstrasse 222
Zurich CH-8010, 8005
Switzerland
0041442924689 (Phone)

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