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Performance of actively managed funds

Haas, Cornelius LU (2017) NEKN02 20171
Department of Economics
Abstract
Due to the expected knowledge of the management, actively managed equity funds are expected to have a competitive performance compared to the market. To investigate this expectation, two portfolios of American and German equity funds are examined for their performance compared to their respective markets. With monthly gross and net returns, both gross and net performances are analysed. For the performance analysis, the three factor model from Fama & French is used. Furthermore the individual funds’ performances are tested for randomness to answer the question whether the funds are significantly influenced by the management. This test is accomplished with a Bernoulli trial.

It could be found out that the gross performance of the German... (More)
Due to the expected knowledge of the management, actively managed equity funds are expected to have a competitive performance compared to the market. To investigate this expectation, two portfolios of American and German equity funds are examined for their performance compared to their respective markets. With monthly gross and net returns, both gross and net performances are analysed. For the performance analysis, the three factor model from Fama & French is used. Furthermore the individual funds’ performances are tested for randomness to answer the question whether the funds are significantly influenced by the management. This test is accomplished with a Bernoulli trial.

It could be found out that the gross performance of the German funds is approximately at market level. The gross and net performances of the American funds as well as the net performance of the German funds are below the respective market level. In the test for randomness, no evidence for a management influence can be found for the German funds. For the American funds, the test shows evidence of a negative influence from the management.

Overall it is shown that the performance of actively managed funds cannot compete with the market performance. (Less)
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author
Haas, Cornelius LU
supervisor
organization
course
NEKN02 20171
year
type
H1 - Master's Degree (One Year)
subject
keywords
performance, managed funds, three factor model, American funds, German funds
language
English
id
8910748
date added to LUP
2017-06-13 15:20:01
date last changed
2017-06-13 15:20:01
@misc{8910748,
  abstract     = {Due to the expected knowledge of the management, actively managed equity funds are expected to have a competitive performance compared to the market. To investigate this expectation, two portfolios of American and German equity funds are examined for their performance compared to their respective markets. With monthly gross and net returns, both gross and net performances are analysed. For the performance analysis, the three factor model from Fama & French is used. Furthermore the individual funds’ performances are tested for randomness to answer the question whether the funds are significantly influenced by the management. This test is accomplished with a Bernoulli trial.

It could be found out that the gross performance of the German funds is approximately at market level. The gross and net performances of the American funds as well as the net performance of the German funds are below the respective market level. In the test for randomness, no evidence for a management influence can be found for the German funds. For the American funds, the test shows evidence of a negative influence from the management.

Overall it is shown that the performance of actively managed funds cannot compete with the market performance.},
  author       = {Haas, Cornelius},
  keyword      = {performance,managed funds,three factor model,American funds,German funds},
  language     = {eng},
  note         = {Student Paper},
  title        = {Performance of actively managed funds},
  year         = {2017},
}