Evaluation of Performance and Active Management in Norwegian Equity Funds: An Empirical Study of the Period from January 2006 to December 2015

Lars Martinsen

Student thesis: Master thesis

Abstract

This study examines the performance and active management of a survivorship bias free sample, consisting of 69 actively managed Norwegian equity funds, in the period from January 2006 to December 2015. The paper analyzes performance by adopting well known ex-post performance measures, which accounts for stock picking skills, market timing, and exposure to well-known factor premiums. Additionally, the study provides a comprehensive analysis of active management amongst the sample of funds, as well as discussing why active share may not be appropriate as a sole regulatory measure in Norway. Additionally, the study discusses why the recent criticism of active Norwegian equity funds appear to be justified.
The paper finds that the majority of the funds show no significant evidence of outperformance neither gross nor net expenses. However, certain fund products appear to significantly deliver outperformance net expenses, but only at an individual level. Moreover, the study finds that the average active share throughout the 10-year period is below the applied cut-off value of 50 percent, and that the majority of funds appear to follow a passive management strategy, whilst charging active management fees.
By examining the relationship between active share and alpha, the results suggest a positive, yet not significant, relationship for the sample as a whole. Whilst, separating the sample into quintiles based on active share, introduces a statistically significant positive relationship for two of the quintiles, representing funds with an active share between 30 and 65 percent.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2016
Number of pages110