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Eurozone regulation bias in the active share measure

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  • Loban, Lidia
  • Sarto, José Luis
  • Vicente, Luis

Abstract

This study is the first to examine how both the domestic equity benchmark concentration and the Directive 2009/65/EC on the risk of portfolio diversification may distort the accuracy of the original Active Share measure of Cremers and Petajisto (2009) in the Eurozone mutual fund industry. The main contribution of this paper is to provide statistical significance to the Active Share measure considering the spurious activity levels due to this benchmark concentration. The empirical application to a comprehensive sample of domestic equity funds provides evidence of significant differences in the actual levels of active management in the Eurozone mutual fund industries.

Suggested Citation

  • Loban, Lidia & Sarto, José Luis & Vicente, Luis, 2020. "Eurozone regulation bias in the active share measure," International Review of Financial Analysis, Elsevier, vol. 72(C).
    • Handle: RePEc:eee:finana:v:72:y:2020:i:c:s1057521920302088
    DOI: 10.1016/j.irfa.2020.101564
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    References listed on IDEAS

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    Cited by:

    1. Loban, Lidia & Sarto, José Luis & Vicente, Luis, 2021. "Determinants of non-compliant equity funds with EU portfolio concentration limits," Journal of Multinational Financial Management, Elsevier, vol. 62(C).
    2. Chao, Xiangrui & Ran, Qin & Chen, Jia & Li, Tie & Qian, Qian & Ergu, Daji, 2022. "Regulatory technology (Reg-Tech) in financial stability supervision: Taxonomy, key methods, applications and future directions," International Review of Financial Analysis, Elsevier, vol. 80(C).

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    More about this item

    Keywords

    Active share; Benchmark concentration; Eurozone mutual fund industry; Portfolio regulation;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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