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Scale and skills in European active management: Impact of a new regulatory context

Author

Listed:
  • Veasna Khim

    (CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine)

  • Hery Razafitombo

    (CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine)

Abstract

This study examines the impact of a new regulatory context on the dynamics and nature of returns to scale in European active management. Using a sample of 1325 actively managed European equity funds and following Pastor, Stambaugh, and Taylor's model from 2015, we find strong evidence of industry-level decreasing returns to scale. We also find that the new regulatory context creates structural breaks in the optimal scale that significantly change the size-performance relationship. We find strong support that emerging and small-cap funds allow increasing returns to scale. We find evidence that fund families play a moderating role in decreasing returns to scale. Further, the results show a significant upward trend in fund skills evolution.

Suggested Citation

  • Veasna Khim & Hery Razafitombo, 2023. "Scale and skills in European active management: Impact of a new regulatory context," Post-Print hal-04197518, HAL.
    • Handle: RePEc:hal:journl:hal-04197518
    DOI: 10.1016/j.jbankfin.2023.106963
    as

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