Evaluating the Persistence of Outperformance in US Mutual Funds: Are Active Managers Consistently Beating the Market?: Explores whether actively managed mutual funds outperform passive benchmark indexes and how fund manager decisions influence returns.
Translated title
Evaluating the Persistence of Outperformance in US Mutual Funds: Are Active Managers Consistently Beating the Market?
Author
Prima, Sahana Irin
Term
4. semester
Publication year
2025
Submitted on
2025-06-01
Pages
105
Abstract
I det seneste årti har fremvoksende markeder stået for mere end to tredjedele af væksten i det globale BNP. Det har fornyet debatten om aktiv kontra passiv investering i markeder, der ofte anses for næsten effektive. Denne afhandling undersøger, om aktivt forvaltede, åbne amerikanske investeringsforeninger med fokus på fremvoksende markeder har leveret unormale, risikojusterede afkast fra begyndelsen af 2015 til begyndelsen af 2025, og søger at forklare eventuelle merafkast. Antagelsen er, at lavere markedsefficiens kan give flere muligheder for arbitrage (at udnytte fejlprissætninger, indtil priserne retter sig). Analysen bygger på data fra FactSet for 26 amerikansk-baserede aktive fonde med fokus på fremvoksende markeder. Performance vurderes op imod S&P 500 ved hjælp af fem mål for risiko og afkast forankret i moderne porteføljeteori og CAPM: Jensen’s alpha (merafkast i forhold til CAPM), Treynor-forholdet og Sharpe-forholdet (afkast pr. risikoeenhed), informationsratio (afkast relativt til et benchmark) samt regressioner med Fama-French tre-faktormodellen (markeds-, størrelse- og værdi-faktorer). I disse regressioner havde Fama-French tre-faktormodellen den højeste forklaringskraft blandt de anvendte tilgange. Denne ramme bruges til at vurdere, om aktiv forvaltning i fremvoksende markeder systematisk overperformer på risikojusteret basis.
Over the past decade, emerging markets have accounted for more than two-thirds of global GDP growth, renewing debate about active versus passive investing in markets viewed as nearly efficient. This thesis examines whether actively managed, open-end US mutual funds focused on emerging markets delivered abnormal, risk-adjusted returns from early 2015 to early 2025, and seeks to explain any excess returns. The premise is that lower market efficiency may create more opportunities for arbitrage (profiting from mispricings as prices correct). Using FactSet data on 26 US-based active mutual funds investing in emerging markets, performance is evaluated against the S&P 500 with five measures grounded in Modern Portfolio Theory and the CAPM: Jensen’s alpha (excess return over CAPM), the Treynor ratio and the Sharpe ratio (return per unit of risk), the Information ratio (return relative to a benchmark), and regressions using the Fama-French three-factor model (market, size, and value factors). In these regressions, the Fama-French three-factor model shows the highest explanatory power among the approaches used. This framework is used to assess whether active management in emerging markets systematically outperforms on a risk-adjusted basis.
[This summary has been rewritten with the help of AI based on the project's original abstract]
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