Market-Beating Stock Strategies Don’t Last
As investors have caught on that actively managed funds typically fail to outperform index funds with a similar benchmark, the active market’s share of total assets has shrunk from about 90 percent of the pie at the turn of the century to 50 percent today.
Fees represent a potent headwind for actively managed funds, as it can be hard to generate returns that make up for an annual average charge that is 0.60 percentage points higher, on average, than that for index funds.
But active managers face yet another challenge in generating market-beating performance, suggests research by Chicago Booth PhD student Benjamin Marrow and Booth’s Stefan Nagel. Strategies discovered to exploit market anomalies—such as momentum…
