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Aneel Keswani, David Stolin and Maxim Zagonov
 
''UK fund returns and sector diversification''
( 2016, Vol. 36 No.1 )
 
 
We examine the performance of UK equity mutual funds relative to the simple passive alternative of equal sector-weighting. While it has often been reported that only a minority of funds beat the market index, such funds are nonetheless numerous, and many investors have been drawn to active management in the hope that they can spot these funds (Gruber 1996). By contrast, we show that few if any funds outperform equal weighting of industry sectors in the post-1987 period. Our results significantly increase the burden of proof on active equity fund managers wishing to convince investors that they can outperform passive strategies, and introduce an easy to implement passive alternative for would-be investors in such funds.
 
 
Keywords: mutual funds, factor models, smart beta, diversification return
JEL: G1 - (G11, G13, G13) Portfolios, Investments, Asset and Futures Pricing, Trading Volume & Bond Interest Rates
 
Manuscript Received : Jan 15 2016 Manuscript Accepted : Feb 04 2016

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