Active vs. passive, the case of sector equity funds

Authors

  • Yuhong Fan School of Accounting & Taxation, Weber State University
  • Crystal Yan Lin School of Business, Eastern Illinois University

DOI:

https://doi.org/10.61190/fsr.v28i2.3422

Abstract

This paper examines performance of 95 actively managed U.S. sector equity mutual funds from 29 fund families relative to their peer exchange-traded funds, SPDR sector ETFs, in the period of 2008 to 2017. Our results do not show considerable evidence that actively managed sector mutual funds outperform their passive counterparties. None of the mutual fund portfolios produces a signifi- cant positive alpha through factor models or delivers a significant positive alpha against their peer ETFs. When focusing on the nine oldest actively managed Fidelity sector mutual funds, outperform- ance in the period of 1999–2010, which is reported in literature, appears to fade away during the pe- riod of 2011-2017. Alpha analyses of a larger sample of 60 sector mutual funds show similar performance deterioration in the same 19-year period. The results indicate that U.S. sector equity market has become more efficient in the past decade.

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Published

2020-06-30

How to Cite

Fan, Y., & Lin, C. Y. (2020). Active vs. passive, the case of sector equity funds. Financial Services Review, 28(2), 159–177. https://doi.org/10.61190/fsr.v28i2.3422

Issue

Vol. 28 No. 2 (2020): Summer 2020

Section

New Original Submission

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Copyright (c) 2020 Academy of Financial Services

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