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Active vs. Passive Portfolio Management: Can an Active Financial Management Strategy Bring Better Returns than Market Average (net of fees)?

by Fleming, Evan Rukavina

Abstract

Every investor faces numerous decisions when it comes to managing their money. One of these decisions, which is still relevant today, is the choice between active and passive portfolio management. Today’s well renowned economists and investment specialists are not in agreement on this discussion. Passive funds usually generate adequate returns but some argue there is missed opportunity using this strategy. On the other hand, active funds can produce very generous returns, however, there is an argument to be made that their fees offset the additional returns generated. This study tests 146 ‘No Transaction fee only’ mutual funds over a 5-year return period, using an OLS regression model. Isolating a number of specific explanatory variables, we hope to provide further insight for the average investor, and help suggest what types of funds are in their best interest to purchase. Over this 5-year return period we found that actively managed funds did produce higher returns on average (net of fees). However, in the long-term it is inconclusive as to which strategy is superior.

Note

The author has given permission for this work to be deposited in the Digital Archive of Colorado College.

Colorado College Honor Code upheld.

Includes bibliographical references.

Administrative Notes

The author has given permission for this work to be deposited in the Digital Archive of Colorado College.

Colorado College Honor Code upheld.

Copyright
Copyright restrictions apply.
Publisher
Colorado College Tutt Library
PID
coccc:29906
Digital Origin
born digital
Extent
27 pages : illustrations
Thesis
Senior Thesis -- Colorado College
Thesis Advisor
Vibha Kapuria-Foreman
Department/Program
Economics and Business
Degree Name
Bachelor of Arts
Degree Type
bachelor
Degree Grantor
Colorado College Tutt Library
Date Issued
2017-07