Does active fund management add value? An Empirical Investigation of the Performance of Swedish Mutual Equity Funds, 2000-2011

Jacob Wallander

Studenteropgave: Kandidatafhandlinger


This study investigates the performance of 37 Swedish mutual equity funds during the period of January 2000 to July 2011. The study focuses on fund managers’ stock selection and market timing skills, as well as their ability to repeat historical performance over subsequent periods. In order to relax the assumption of a constant beta estimate, the regressions are performed in a conditional setting, in addition to the standard unconditional setting. The overall results suggest that fund managers have performed neutrally to weakly negative as indicated by the net expense alphas. Yet, when using gross returns, the results of managerial stock selection ability are positive. The fund expenses’ negative impact on performance is best shown in the tests where the low-expense funds outperform the high-expense funds. Moreover, the results of fund managers’ ability to time the market are neutral to weakly positive. Yet, when adding terms to the standard regression in order to encompass managerial market timing aspirations, the alpha estimates are simultaneously severely punished below zero. Finally, no evidence of performance persistence is documented. In all, it seems very difficult to justify the high level of expenses when seeing the risk-adjusted net returns that the actively managed funds have produced.

UddannelserCand.merc.fsm Finance and Strategic Management, (Kandidatuddannelse) Afsluttende afhandling
Antal sider79