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Does Active Management Beat the Market? Evidence from Italy

Author

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  • Nicolò Zorich
  • Gabriele Cardullo

Abstract

In this paper we analyze a sample of sixteen actively managed equity mutual funds of the Italian market in the period 2008-2017 to test if they have been able to beat the market. We first make a comparison between the funds and two passive stock indexes. In this case, all funds deliver higher returns. Then we contrast the performance of each fund with that of its own benchmark, that in most cases is a weighted average of relevant passive indexes of the Italian stock market. We find that in general actively managed funds deliver lower returns. In particular, just three of the sixteen active funds offer higher net returns compared to their benchmarks. Three other funds beat the market only before fees. All the other funds exhibit lower returns even ignoring the costs. Â JEL classification numbers: G11, G12, G14.

Suggested Citation

  • Nicolò Zorich & Gabriele Cardullo, 2020. "Does Active Management Beat the Market? Evidence from Italy," Journal of Finance and Investment Analysis, SCIENPRESS Ltd, vol. 9(3), pages 1-1.
    • Handle: RePEc:spt:fininv:v:9:y:2020:i:3:f:9_3_1
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    References listed on IDEAS

    as
    1. Martijn Cremers & Antti Petajisto, 2006. "How Active is Your Fund Manager? A New Measure That Predicts Performance," Yale School of Management Working Papers amz2370, Yale School of Management, revised 01 May 2009.
    2. Cremers, Martijn & Pareek, Ankur, 2016. "Patient capital outperformance: The investment skill of high active share managers who trade infrequently," Journal of Financial Economics, Elsevier, vol. 122(2), pages 288-306.
    3. Burton G. Malkiel, 2003. "Passive Investment Strategies and Efficient Markets," European Financial Management, European Financial Management Association, vol. 9(1), pages 1-10, March.
    4. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
    5. Joseph Gerakos & Juhani T. Linnainmaa & Adair Morse, 2016. "Asset Managers: Institutional Performance and Smart Betas," NBER Working Papers 22982, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Active vs passive management; stock returns; systematic risk.;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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