Active-Share Study

AAA

DEFINITION of 'Active-Share Study'

An academic study conducted by researchers from Yale in 2006. The active-share study examined the proportion of stock holdings in a mutual fund's composition that was different from the composition found in its benchmark. The greater the difference between the asset composition of the fund and its benchmark, the greater the active share.

According to the active-share study, there was a positive correlation between a fund's active-share value and the fund's performance against its benchmark.

INVESTOPEDIA EXPLAINS 'Active-Share Study'

For example, a mutual fund with an active-share percentage of 75% indicates that 75% of its assets differed from its index, while the remaining 25% mirrored the index.

The study found that funds with a higher active-share value would tend to be more consistent in generating high returns against their benchmark indexes, which implies that more actively managed funds have more skilled managers.

RELATED TERMS
  1. Active Investing

    An investment strategy involving ongoing buying and selling actions ...
  2. Passive Management

    A style of management associated with mutual and exchange-traded ...
  3. Index Hugger

    A managed mutual fund that tends to perform much like a benchmark ...
  4. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
  5. Active Management

    The use of a human element, such as a single manager, co-managers ...
  6. Benchmark

    A standard against which the performance of a security, mutual ...
RELATED FAQS
  1. Is there a situation in which wash trading is legal?

    Wash trading, the intentional practice of manipulating a stock's activity level to deceive other investors, is not a legal ... Read Full Answer >>
  2. What action is the SEC likely to take on 12b-1 fees?

    The Securities and Exchange Commission (SEC) may take action to impose greater regulation on how 12b-1 fees are used, or ... Read Full Answer >>
  3. What is considered a reasonable 12b-1 fee?

    A reasonable 12b-1 fee is generally considered to be 0.25% of the assets of the mutual fund. The maximum amount allowed for ... Read Full Answer >>
  4. What are some of the most common mutual funds that give exposure to the retail sector?

    There are a number of mutual funds that give exposure to the retail sector. Three of the most popular funds are the Fidelity ... Read Full Answer >>
  5. What is the 12b-1 fee meant to cover?

    A 12b-1 fee in a mutual fund is meant to cover the fees of companies and individuals through which investors of a fund buy ... Read Full Answer >>
  6. What are the most popular mutual funds that give exposure to the utilities sector?

    Some of the most popular mutual funds that provide exposure to the utilities sector include American Century Utilities, Prudential ... Read Full Answer >>
Related Articles
  1. Mutual Funds & ETFs

    How To Pick A Good Mutual Fund

    Learn how to evaluate mutual funds and find the right one for you.
  2. Active Trading

    Peter Lynch On Playing The Market

    Everyone can appreciate great advice from a professional. Read on to benefit from the vast experience of Peter Lynch.
  3. Mutual Funds & ETFs

    Your Mutual Fund: It's Riskier Than You Think

    Fund managers often take on more risk than they should, putting business ahead of fund holders' interests.
  4. Mutual Funds & ETFs

    Active Share Measures Active Management

    A 2006 study proves the effectiveness of a new way of sizing up your portfolio manager.
  5. Mutual Funds & ETFs

    Why Mutual Funds are Still Better than ETFs

    Mutual funds might not be as sexy as they used to be, but they offer some advantages over ETFs – especially for certain types of investors.
  6. Professionals

    Why ETFs Often Edge Out Mutual Funds

    A deep look reveals why — in most instances — ETFs beat out mutual funds.
  7. Investing Basics

    Shareholders: Vote Your Proxy and Be Heard

    Voting shares, in person or via proxy ballot, is a right every shareholder should exercise. Here's why.
  8. Fundamental Analysis

    Calculating Tracking Error

    Tracking error is the difference between the return on a portfolio or fund, and the benchmark it is expected to mirror (or track).
  9. Investing Basics

    What is the Shadow Banking System?

    The shadow banking system is composed of financial institutions that do not take deposits in the tradition sense.
  10. Investing Basics

    What's a Benchmark?

    A benchmark is a standard investors choose to gauge the performance of their portfolios.

You May Also Like

Hot Definitions
  1. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  2. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  3. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  4. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  5. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  6. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!