The value of active portfolio management [An article from: Journal of Economics and Business]

This digital document is a journal article from Journal of Economics and Business, published by Elsevier in 2004. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
We calculate the value of interim portfolio revision, an integral component of active management of mutual funds by comparing the returns on actively managed mutual fund portfolios with the returns the fund portfolios would have earned had there been no interim revision. The results show that, on an average, excess returns from interim portfolio revision do not cover the incremental trading costs, even over holding periods as long as 6 months. Across mutual funds, we find evidence of a positive relationship between the excess returns and mutual fund expense ratios suggesting that those managers who generate higher excess returns charge higher fees from the stockholders.