Active Share and Emerging Market Equity Funds
16 Pages Posted: 2 Feb 2018
Date Written: December 1, 2017
This paper represents the first attempt in the literature to specifically and solely examine the relationship between active share and emerging market equity fund performance. To do this we use a sample of U.S.-based actively managed diversified emerging market equity funds that we follow for six years from 2009–2014. With this sample of funds, 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 also find evidence that highly active funds that keep the level of activeness consistent over time have significantly better performance than funds that vary the 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: Suggested Citation