On the Impact of Closet Indexing in Active Fund Management
ثبت نشده
چکیده
We propose a simple model to quantify the performance impact of closet-indexing in equity fund management, with a focus on mutual funds. The model requires only two inputs: the Sharpe ratio of the market index and the Rsquare from a regression of a fund’s excess returns on systematic factor returns. Due to pervasive closet-indexing, R-squares are uniformly close to one, regardless of the asset pricing benchmark. We show that closet-indexing leads to gross alphas that do not survive realistic trading cost and expense ratios.
منابع مشابه
Information Asymmetry and Incentives for Active Management
This paper examines the equilibrium consequences of strategic behavior of mutual fund managers who withhold information about their funds and their managerial ability. We show that under this information asymmetry, low skills in the industry can result in a growth of passive management. A separating equilibrium in which skilled managers actively manage funds arises only if their compensation de...
متن کاملDynamics of Risk Perception Towards Mutual Fund Investment Decisions
The present paper measures the risk perception of the bank employees in respect of investment in mutual fund and to identify the factors affecting risk perception. The paper also attempts to find out the impact of these factors on overall risk perception. The study is based on primary data collected by using questionnaire from the bank employees in Tripura state of India. For the analysis of da...
متن کاملDesigning a Dynamic Macro Econometric Model for the Iranian economy with Emphasizing on dynamics of the National Development Fund
Oil Revenue Management (ORM) has always been one of the key challenges facing the oil rich developing countries. In this regard, the main objective of this paper is to provide a dynamic macroeconometric model adapted to the state of the Iranian economy. Also, the assessment of the dynamics of the National Development Fund (NDF) and its impact on macroeconomic variables are discussed. The result...
متن کاملOil Price Shocks and Russia’s Economic Growth: The Impacts and Policies for Overcoming Them
Considering Russia’s rich and vast oil resources, this country is one of the world’s greatest producers and exporters of this nonrenewable energy resource, and like other petrostates, receives a major part of its national income in this way. The dependence of Russia’s budget on oil has raised the significance of world oil price fluctuations for this country. Since 1970s, the global oil market h...
متن کاملFinancial Performance, Costs, and Active Management of US Socially Responsible Investment Funds
Responsible investors, like regular investors, need to investigate whether to actively or passively manage their investments. This especial is of interest for responsible investing as it requires additional information generation and processing compared to more conventional investing. This study compares socially responsible investment funds in the US with a special focus on their financial per...
متن کامل