Passive versus Active Fund Performance: Do Index Funds Have Skill?

Passive versus Active Fund Performance: Do Index Funds Have Skill?

We apply methods designed to measure mutual fund skill to a cross section of funds that is unlikely to exhibit managerial portfolio selection skill: index funds. Surprisingly, these tests imply index fund skill exists, is persistent, and is in similar proportion as in active funds. We use the distri...

Ausführliche Beschreibung

Gespeichert in:
Bibliographische Detailangaben
Veröffentlicht in:Journal of financial and quantitative analysis 2018-02, Vol.53 (1), p.33-64
Hauptverfasser: Crane, Alan D., Crotty, Kevin
Format: Artikel
Sprache:eng
Schlagworte:
Benchmarks
Fees & charges
Index funds
Investment advisors
Quantitative analysis
Online-Zugang:Volltext
Tags: Tag hinzufügen
Keine Tags, Fügen Sie den ersten Tag hinzu!
container_end_page 64
container_issue 1
container_start_page 33
container_title Journal of financial and quantitative analysis
container_volume 53
creator Crane, Alan D.
Crotty, Kevin
description We apply methods designed to measure mutual fund skill to a cross section of funds that is unlikely to exhibit managerial portfolio selection skill: index funds. Surprisingly, these tests imply index fund skill exists, is persistent, and is in similar proportion as in active funds. We use the distribution of passive fund performance to gauge the incremental ability of active managers. Outperformance by top active funds is lower when benchmarked to the index fund distribution and disappears when we account for residual risk. Stochastic dominance tests suggest no risk-averse investor should choose a random active fund over a random index fund.
doi_str_mv 10.1017/S0022109017000904
format Article
fullrecord <record><control><sourceid>jstor_proqu</sourceid><recordid>TN_cdi_proquest_journals_2787228601</recordid><sourceformat>XML</sourceformat><sourcesystem>PC</sourcesystem><cupid>10_1017_S0022109017000904</cupid><jstor_id>26591900</jstor_id><sourcerecordid>26591900</sourcerecordid><originalsourceid>FETCH-LOGICAL-c518t-da43676cd064da6a51f460bdd4c9cea831a8a4f64516b0679c82a43d8a5818133</originalsourceid><addsrcrecordid>eNp1UE1LwzAYDqLgnP4AD0LBc_V90zRNvciczg0GDqbnkiWptHbtTNqh_97UDT2Ip_fj-YKHkHOEKwRMrpcAlCKkfgfwgx2QASYxD3mK_JAMejjs8WNy4lzpOf4BA3K3kM4VWxNsjXWdC0aq7a9JV-tgYWze2LWslbkJ7ptgVmvz8Q25YCo9a_lWVNXtKTnKZeXM2X4Oycvk4Xk8DedPj7PxaB6qGEUbaskinnClgTMtuYwxZxxWWjOVKiNFhFJIlnMWI18BT1IlqJdoIWOBAqNoSC53vhvbvHfGtVnZdLb2kRlNREKp4ICehTuWso1z1uTZxhZraT8zhKyvKvtTlddc7DSlaxv7I6A8TjEF8Hi095TrlS30q_mN_t_1CxQ3cdc</addsrcrecordid><sourcetype>Aggregation Database</sourcetype><iscdi>true</iscdi><recordtype>article</recordtype><pqid>2787228601</pqid></control><display><type>article</type><title>Passive versus Active Fund Performance: Do Index Funds Have Skill?</title><source>Cambridge Journals</source><source>EBSCOhost Business Source Complete</source><source>JSTOR Archive Collection A-Z Listing</source><creator>Crane, Alan D. ; Crotty, Kevin</creator><creatorcontrib>Crane, Alan D. ; Crotty, Kevin</creatorcontrib><description>We apply methods designed to measure mutual fund skill to a cross section of funds that is unlikely to exhibit managerial portfolio selection skill: index funds. Surprisingly, these tests imply index fund skill exists, is persistent, and is in similar proportion as in active funds. We use the distribution of passive fund performance to gauge the incremental ability of active managers. Outperformance by top active funds is lower when benchmarked to the index fund distribution and disappears when we account for residual risk. Stochastic dominance tests suggest no risk-averse investor should choose a random active fund over a random index fund.</description><identifier>ISSN: 0022-1090</identifier><identifier>EISSN: 1756-6916</identifier><identifier>DOI: 10.1017/S0022109017000904</identifier><language>eng</language><publisher>New York, USA: Cambridge University Press</publisher><subject>Benchmarks ; Fees &amp; charges ; Index funds ; Investment advisors ; Quantitative analysis</subject><ispartof>Journal of financial and quantitative analysis, 2018-02, Vol.53 (1), p.33-64</ispartof><rights>Copyright © Michael G. Foster School of Business, University of Washington 2018</rights><rights>COPYRIGHT 2018, MICHAEL G. FOSTER SCHOOL OF BUSINESS, UNIVERSITY OF WASHINGTON</rights><lds50>peer_reviewed</lds50><woscitedreferencessubscribed>false</woscitedreferencessubscribed><citedby>FETCH-LOGICAL-c518t-da43676cd064da6a51f460bdd4c9cea831a8a4f64516b0679c82a43d8a5818133</citedby><cites>FETCH-LOGICAL-c518t-da43676cd064da6a51f460bdd4c9cea831a8a4f64516b0679c82a43d8a5818133</cites></display><links><openurl>$$Topenurl_article</openurl><openurlfulltext>$$Topenurlfull_article</openurlfulltext><thumbnail>$$Tsyndetics_thumb_exl</thumbnail><linktopdf>$$Uhttps://www.jstor.org/stable/pdf/26591900$$EPDF$$P50$$Gjstor$$H</linktopdf><linktohtml>$$Uhttps://www.cambridge.org/core/product/identifier/S0022109017000904/type/journal_article$$EHTML$$P50$$Gcambridge$$H</linktohtml><link.rule.ids>164,314,780,784,803,27924,27925,55628,58017,58250</link.rule.ids></links><search><creatorcontrib>Crane, Alan D.</creatorcontrib><creatorcontrib>Crotty, Kevin</creatorcontrib><title>Passive versus Active Fund Performance: Do Index Funds Have Skill?</title><title>Journal of financial and quantitative analysis</title><addtitle>J. Financ. Quant. Anal</addtitle><description>We apply methods designed to measure mutual fund skill to a cross section of funds that is unlikely to exhibit managerial portfolio selection skill: index funds. Surprisingly, these tests imply index fund skill exists, is persistent, and is in similar proportion as in active funds. We use the distribution of passive fund performance to gauge the incremental ability of active managers. Outperformance by top active funds is lower when benchmarked to the index fund distribution and disappears when we account for residual risk. Stochastic dominance tests suggest no risk-averse investor should choose a random active fund over a random index fund.</description><subject>Benchmarks</subject><subject>Fees &amp; charges</subject><subject>Index funds</subject><subject>Investment advisors</subject><subject>Quantitative analysis</subject><issn>0022-1090</issn><issn>1756-6916</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2018</creationdate><recordtype>article</recordtype><sourceid>ABUWG</sourceid><sourceid>AFKRA</sourceid><sourceid>BENPR</sourceid><sourceid>CCPQU</sourceid><sourceid>DWQXO</sourceid><recordid>eNp1UE1LwzAYDqLgnP4AD0LBc_V90zRNvciczg0GDqbnkiWptHbtTNqh_97UDT2Ip_fj-YKHkHOEKwRMrpcAlCKkfgfwgx2QASYxD3mK_JAMejjs8WNy4lzpOf4BA3K3kM4VWxNsjXWdC0aq7a9JV-tgYWze2LWslbkJ7ptgVmvz8Q25YCo9a_lWVNXtKTnKZeXM2X4Oycvk4Xk8DedPj7PxaB6qGEUbaskinnClgTMtuYwxZxxWWjOVKiNFhFJIlnMWI18BT1IlqJdoIWOBAqNoSC53vhvbvHfGtVnZdLb2kRlNREKp4ICehTuWso1z1uTZxhZraT8zhKyvKvtTlddc7DSlaxv7I6A8TjEF8Hi095TrlS30q_mN_t_1CxQ3cdc</recordid><startdate>20180201</startdate><enddate>20180201</enddate><creator>Crane, Alan D.</creator><creator>Crotty, Kevin</creator><general>Cambridge University Press</general><scope>AAYXX</scope><scope>CITATION</scope><scope>3V.</scope><scope>7WY</scope><scope>7WZ</scope><scope>7X1</scope><scope>7XB</scope><scope>87Z</scope><scope>8A9</scope><scope>8BJ</scope><scope>8FK</scope><scope>8FL</scope><scope>ABUWG</scope><scope>AFKRA</scope><scope>ANIOZ</scope><scope>BENPR</scope><scope>BEZIV</scope><scope>CCPQU</scope><scope>DWQXO</scope><scope>FQK</scope><scope>FRAZJ</scope><scope>FRNLG</scope><scope>F~G</scope><scope>JBE</scope><scope>K60</scope><scope>K6~</scope><scope>L.-</scope><scope>M0C</scope><scope>PQBIZ</scope><scope>PQBZA</scope><scope>PQEST</scope><scope>PQQKQ</scope><scope>PQUKI</scope><scope>Q9U</scope><scope>S0X</scope></search><sort><creationdate>20180201</creationdate><title>Passive versus Active Fund Performance: Do Index Funds Have Skill?</title><author>Crane, Alan D. ; Crotty, Kevin</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c518t-da43676cd064da6a51f460bdd4c9cea831a8a4f64516b0679c82a43d8a5818133</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>2018</creationdate><topic>Benchmarks</topic><topic>Fees &amp; charges</topic><topic>Index funds</topic><topic>Investment advisors</topic><topic>Quantitative analysis</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>Crane, Alan D.</creatorcontrib><creatorcontrib>Crotty, Kevin</creatorcontrib><collection>CrossRef</collection><collection>ProQuest Central (Corporate)</collection><collection>Access via ABI/INFORM (ProQuest)</collection><collection>ABI/INFORM Global (PDF only)</collection><collection>Accounting &amp; Tax Database</collection><collection>ProQuest Central (purchase pre-March 2016)</collection><collection>ABI/INFORM Global (Alumni Edition)</collection><collection>Accounting &amp; Tax Database (Alumni Edition)</collection><collection>International Bibliography of the Social Sciences (IBSS)</collection><collection>ProQuest Central (Alumni) (purchase pre-March 2016)</collection><collection>ABI/INFORM Collection (Alumni Edition)</collection><collection>ProQuest Central (Alumni Edition)</collection><collection>ProQuest Central UK/Ireland</collection><collection>Accounting, Tax &amp; Banking Collection</collection><collection>ProQuest Central</collection><collection>Business Premium Collection</collection><collection>ProQuest One Community College</collection><collection>ProQuest Central Korea</collection><collection>International Bibliography of the Social Sciences</collection><collection>Accounting, Tax &amp; Banking Collection (Alumni)</collection><collection>Business Premium Collection (Alumni)</collection><collection>ABI/INFORM Global (Corporate)</collection><collection>International Bibliography of the Social Sciences</collection><collection>ProQuest Business Collection (Alumni Edition)</collection><collection>ProQuest Business Collection</collection><collection>ABI/INFORM Professional Advanced</collection><collection>ABI/INFORM Global</collection><collection>ProQuest One Business</collection><collection>ProQuest One Business (Alumni)</collection><collection>ProQuest One Academic Eastern Edition (DO NOT USE)</collection><collection>ProQuest One Academic</collection><collection>ProQuest One Academic UKI Edition</collection><collection>ProQuest Central Basic</collection><collection>SIRS Editorial</collection><jtitle>Journal of financial and quantitative analysis</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>Crane, Alan D.</au><au>Crotty, Kevin</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>Passive versus Active Fund Performance: Do Index Funds Have Skill?</atitle><jtitle>Journal of financial and quantitative analysis</jtitle><addtitle>J. Financ. Quant. Anal</addtitle><date>2018-02-01</date><risdate>2018</risdate><volume>53</volume><issue>1</issue><spage>33</spage><epage>64</epage><pages>33-64</pages><issn>0022-1090</issn><eissn>1756-6916</eissn><abstract>We apply methods designed to measure mutual fund skill to a cross section of funds that is unlikely to exhibit managerial portfolio selection skill: index funds. Surprisingly, these tests imply index fund skill exists, is persistent, and is in similar proportion as in active funds. We use the distribution of passive fund performance to gauge the incremental ability of active managers. Outperformance by top active funds is lower when benchmarked to the index fund distribution and disappears when we account for residual risk. Stochastic dominance tests suggest no risk-averse investor should choose a random active fund over a random index fund.</abstract><cop>New York, USA</cop><pub>Cambridge University Press</pub><doi>10.1017/S0022109017000904</doi><tpages>32</tpages></addata></record>
fulltext fulltext
identifier ISSN: 0022-1090
ispartof Journal of financial and quantitative analysis, 2018-02, Vol.53 (1), p.33-64
issn 0022-1090
1756-6916
language eng
recordid cdi_proquest_journals_2787228601
source Cambridge Journals; EBSCOhost Business Source Complete; JSTOR Archive Collection A-Z Listing
subjects Benchmarks
Fees & charges
Index funds
Investment advisors
Quantitative analysis
title Passive versus Active Fund Performance: Do Index Funds Have Skill?
url https://sfx.bib-bvb.de/sfx_tum?ctx_ver=Z39.88-2004&ctx_enc=info:ofi/enc:UTF-8&ctx_tim=2025-01-02T22%3A22%3A46IST&url_ver=Z39.88-2004&url_ctx_fmt=infofi/fmt:kev:mtx:ctx&rfr_id=info:sid/primo.exlibrisgroup.com:primo3-Article-jstor_proqu&rft_val_fmt=info:ofi/fmt:kev:mtx:journal&rft.genre=article&rft.atitle=Passive%20versus%20Active%20Fund%20Performance:%20Do%20Index%20Funds%20Have%20Skill?&rft.jtitle=Journal%20of%20financial%20and%20quantitative%20analysis&rft.au=Crane,%20Alan%20D.&rft.date=2018-02-01&rft.volume=53&rft.issue=1&rft.spage=33&rft.epage=64&rft.pages=33-64&rft.issn=0022-1090&rft.eissn=1756-6916&rft_id=info:doi/10.1017/S0022109017000904&rft_dat=%3Cjstor_proqu%3E26591900%3C/jstor_proqu%3E%3Curl%3E%3C/url%3E&disable_directlink=true&sfx.directlink=off&sfx.report_link=0&rft_id=info:oai/&rft_pqid=2787228601&rft_id=info:pmid/&rft_cupid=10_1017_S0022109017000904&rft_jstor_id=26591900&rfr_iscdi=true