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Active and passive funds: excess returns and persistence in performance - Evidence from the Swedish fund market 2000-2011 -

Halonen, Elisa LU and Ljungberg, Anna LU (2012) NEKN02 20121
Department of Economics
Abstract (Swedish)
The purpose of this thesis is to study the performance of mutual funds in the Swedish fund market in 2000-2011. We study whether the active funds performed better than passive funds in terms of abnormal returns. We further study if a fund’s historical performance is a direct indicator of the fund’s performance in the future by measuring persistence in performance. Our data includes 28 active and 11 passive funds operating in the Swedish fund market. The one-factor (CAPM) and three-factor (Fama and French) benchmark models are used to estimate the excess returns in individual fund and portfolio level. We calculate a linear regression of fund returns in excel and apply performance indices such as Jensen’s alpha and Treynor’s index. The... (More)
The purpose of this thesis is to study the performance of mutual funds in the Swedish fund market in 2000-2011. We study whether the active funds performed better than passive funds in terms of abnormal returns. We further study if a fund’s historical performance is a direct indicator of the fund’s performance in the future by measuring persistence in performance. Our data includes 28 active and 11 passive funds operating in the Swedish fund market. The one-factor (CAPM) and three-factor (Fama and French) benchmark models are used to estimate the excess returns in individual fund and portfolio level. We calculate a linear regression of fund returns in excel and apply performance indices such as Jensen’s alpha and Treynor’s index. The performance persistence is measured by a separate test including dummy variables as a performance indicator. We concluded that the observed active funds do not generate statistically significant abnormal returns; an investor is better off investing in a passive fund. Further, we discern how some individual funds show persistence in performance as a winner or a loser while no evidence is found for portfolio of funds. (Less)
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author
Halonen, Elisa LU and Ljungberg, Anna LU
supervisor
organization
course
NEKN02 20121
year
type
H1 - Master's Degree (One Year)
subject
keywords
single index model, active and passive funds, excess returns, three factor model
language
English
id
2702113
date added to LUP
2012-06-08 14:27:38
date last changed
2012-06-08 14:27:38
@misc{2702113,
  abstract     = {The purpose of this thesis is to study the performance of mutual funds in the Swedish fund market in 2000-2011. We study whether the active funds performed better than passive funds in terms of abnormal returns. We further study if a fund’s historical performance is a direct indicator of the fund’s performance in the future by measuring persistence in performance. Our data includes 28 active and 11 passive funds operating in the Swedish fund market. The one-factor (CAPM) and three-factor (Fama and French) benchmark models are used to estimate the excess returns in individual fund and portfolio level. We calculate a linear regression of fund returns in excel and apply performance indices such as Jensen’s alpha and Treynor’s index. The performance persistence is measured by a separate test including dummy variables as a performance indicator. We concluded that the observed active funds do not generate statistically significant abnormal returns; an investor is better off investing in a passive fund. Further, we discern how some individual funds show persistence in performance as a winner or a loser while no evidence is found for portfolio of funds.},
  author       = {Halonen, Elisa and Ljungberg, Anna},
  keyword      = {single index model,active and passive funds,excess returns,three factor model},
  language     = {eng},
  note         = {Student Paper},
  title        = {Active and passive funds: excess returns and persistence in performance - Evidence from the Swedish fund market 2000-2011 -},
  year         = {2012},
}