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Making Reasonable Mutual Fund Investment Decisions in the Recovering German Equity Market - Gaining Insight into Active Share

Haskamp, Jannik LU and Eliasson, Adam LU (2015) BUSN89 20151
Department of Business Administration
Abstract
This study investigates influences of certain fund characteristics as independent variables on a funds active share, as introduced by Cremers & Petajisto in 2009. Furthermore, along with active share, the potential use of these variables to predict future mutual fund returns is tested. The study is conducted for the recovering German equity mutual fund market between 2010 and 2015 as a recovery period was assumed to show significantly different results compared to long-term studies. To investigate influences, a cross-sectional study was performed with
partially different results than initially expected. Compared to empirical foundations, the findings for active share are less statistically and economically significant during economic... (More)
This study investigates influences of certain fund characteristics as independent variables on a funds active share, as introduced by Cremers & Petajisto in 2009. Furthermore, along with active share, the potential use of these variables to predict future mutual fund returns is tested. The study is conducted for the recovering German equity mutual fund market between 2010 and 2015 as a recovery period was assumed to show significantly different results compared to long-term studies. To investigate influences, a cross-sectional study was performed with
partially different results than initially expected. Compared to empirical foundations, the findings for active share are less statistically and economically significant during economic recovery in Germany. Although active share can somehow be explained through certain variables, the study disproves pervious findings as active share cannot predict fund performance. Funds with high active share even tend to underperform their benchmarks during recovery. On this basis, a fund investment strategy for the recovering market is proposed, finding exchange traded funds as the more suitable investment vehicle. This mainly derives from the significantly lower fees charged by ETFs. (Less)
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author
Haskamp, Jannik LU and Eliasson, Adam LU
supervisor
organization
course
BUSN89 20151
year
type
H1 - Master's Degree (One Year)
subject
keywords
Active share, exchange traded funds, mutual fund, tracking error, investments
language
English
id
7373750
date added to LUP
2015-06-29 13:36:49
date last changed
2015-06-29 13:36:49
@misc{7373750,
  abstract     = {This study investigates influences of certain fund characteristics as independent variables on a funds active share, as introduced by Cremers & Petajisto in 2009. Furthermore, along with active share, the potential use of these variables to predict future mutual fund returns is tested. The study is conducted for the recovering German equity mutual fund market between 2010 and 2015 as a recovery period was assumed to show significantly different results compared to long-term studies. To investigate influences, a cross-sectional study was performed with
partially different results than initially expected. Compared to empirical foundations, the findings for active share are less statistically and economically significant during economic recovery in Germany. Although active share can somehow be explained through certain variables, the study disproves pervious findings as active share cannot predict fund performance. Funds with high active share even tend to underperform their benchmarks during recovery. On this basis, a fund investment strategy for the recovering market is proposed, finding exchange traded funds as the more suitable investment vehicle. This mainly derives from the significantly lower fees charged by ETFs.},
  author       = {Haskamp, Jannik and Eliasson, Adam},
  keyword      = {Active share,exchange traded funds,mutual fund,tracking error,investments},
  language     = {eng},
  note         = {Student Paper},
  title        = {Making Reasonable Mutual Fund Investment Decisions in the Recovering German Equity Market - Gaining Insight into Active Share},
  year         = {2015},
}