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Does Active Portfolio Management Create Value? An Evaluation of Fund Managers' Decisions

Author

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  • Engström, Stefan

    (Dept. of Finance, Stockholm School of Economics)

Abstract

In this paper, I obtain new measures of the value of active portfolio management by forming replicating portfolios. These measures allow for a separate evaluation of fund managers' strategic and tactical decisions. I also obtain new evidence on the value of trading by decomposing it into long-term trading decisions, short-term trading decisions, and trading that is the result of regulatory restrictions. Overall, the evidence supports the value of active portfolio management and that the average fund manager creates value for its investors. Moreover, the results show a positive relation between the value created and trading activity.

Suggested Citation

  • Engström, Stefan, 2004. "Does Active Portfolio Management Create Value? An Evaluation of Fund Managers' Decisions," SSE/EFI Working Paper Series in Economics and Finance 553, Stockholm School of Economics.
    • Handle: RePEc:hhs:hastef:0553
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    References listed on IDEAS

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    More about this item

    Keywords

    Mutual Funds; Portfolio Evaluation; Performance Attribution; Trading;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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