The Historical Record on Active vs. Passive Mutual Fund Performance
Forthcoming in The Journal of Investing
2019 Academic Research Colloquium for Financial Planning and Related Disciplines
Posted: 13 Sep 2018 Last revised: 15 Sep 2021
Date Written: August 26, 2021
Abstract
This study examines the risk-adjusted performance of actively managed mutual funds vs. passively managed mutual funds between 1991 and 2019 and finds that there is no statistically significant difference in performance between the two types of funds when the passively managed funds are compared to competitively priced actively managed funds. The practical implication of this study is that, setting tax considerations aside, as long as investors are cost-conscious in their fund selection process, investing in passively managed funds does not meaningfully improve investor outcomes.
Keywords: Passive investing, Index funds, Actively managed funds, Mutual fund performance, Mutual fund fees, Mutual fund industry competition
JEL Classification: G11, G23
Suggested Citation: Suggested Citation