The Historical Record on Active vs. Passive Mutual Fund Performance
27 Pages Posted: 13 Sep 2018 Last revised: 9 Dec 2019
Date Written: March 1, 2019
This study examines the risk-adjusted performance of actively managed mutual funds vs. passively managed mutual funds between 1991 and 2018 and finds that the statistical significance of the difference in performance between the two types of funds disappears when the passively managed funds are compared to competitively priced actively managed funds. The practical implication of this study is that, setting tax considerations aside, as long as investors are cost conscious in their fund selection process, investing in passively managed funds does not meaningfully improve investor outcomes.
Keywords: Passive investing, Index funds, Actively managed funds, Mutual fund performance, Mutual fund fees, Mutual fund industry competition
JEL Classification: G11, G23
Suggested Citation: Suggested Citation