Does Active Mutual Fund Management Create Value for the Investor? 2003 (English)Independent thesis Basic level (degree of Bachelor)Student thesis

Abstract [en]

In Sweden, the debate on active and passive management has lately been aimed at the issue of closet index funds, as business magazines have accused actively managed fund for resembling their benchmark indices. At the same time, statistics show that the growing number of mutual fund investors has a strong preference for just actively managed funds, even though research shows that only a small number of such funds perform well enough to cover their higher costs. In the light of these issues, this study investigates whether active mutual fund management can create value for the investor. In order to do so, the performances of 21 Sweden funds were investigated over a five-year period (1998-2002). To be able to deal with the issue of closet index funds, the funds were first of all classified as either passively-, semi-actively-, or actively managed, depending on how much they resembled SIXPRX. For this task, quarterly snapshots of the funds portfolios were looked at. Secondly, we calculated both the nominal and the risk-adjusted returns for each fund, which enabled us to do a variety of comparisons, but most important, to compare the returns of the actively managed funds with that of SIXPRX. In addition to this, we also examined whether any of the actively managed funds had any persistence in performance. The result of our investigation showed that active mutual fund management can create value for the investor which, at the same time, suggests that the Swedish mutual fund market is not efficient in its strong form. Primarily, this finding was based on a strong nominal performance among the actively managed funds, together with positive figures for the Sharpe and Treynor ratios. We did not, however, find any indications of persistence in performance, which rules out the possibility for investors to recognise successful managers in advance.

Place, publisher, year, edition, pages

2003.

Keywords [en]

Mutual fund management, Closet index funds, active management, EMH

Identifiers

URN: urn:nbn:se:hh:diva-10821Local ID: U5945OAI: oai:DiVA.org:hh-10821DiVA, id: diva2:365945

Uppsok

Social and Behavioural Science, Law

Note

Denna uppsats kan beställas från arkivet / This paper can be ordered from the archive. Kontakta / Contact: arkivet@hh.seAvailable from: 2010-11-09 Created: 2010-11-09Bibliographically approved

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