blog

Latest from the Quantamize Blog

Could ingrained beliefs about low-cost ETFs be mistaken? A new study suggests perhaps so

Apr 04, 2019

We Crunch the Numbers, You Make the Trade.We Crunch the Numbers, You Make the Trade.
We Crunch the Numbers, You Make the Trade.We Crunch the Numbers, You Make the Trade.

 

  • MarketWatch, in an article on its opinion page, highlights a new study that sheds light on long-held beliefs about low-cost ETFs versus actively managed mutual funds
  • Actively managed mutual funds have been losing ground to passive, low-cost ETFs that track an index, as many mutual funds have trailed in their performance
  • Investors have opted for these ETFs, not believing the costs of active managers are worth it
  • A study from researchers at the University of Idaho, the College of Saint Benedict & Saint John’s University and Washington State University delves deep into the performance of active managers
  • Researchers looked at the monthly stock trade of over 2,000 mutual funds between 1998 and 2015
  • They separated trades into trades that had to be made because of inflow or outflows and trades that were actively chosen by the manager because of an opinion on the stock
  • Researchers found that managers' outperformance was driven completely by those active trades, showing the power of active management
  • With retail investors being notoriously bad at timing the market, the stock trading managers were forced to do because of flows-caused by the poor timing of investors-often diluted their stock-picking performance
  • The main takeaway was:  while many managers can pick stocks well, it is the retail investor and their poorly timed inflows that often dilute the funds' performance, not the manager's picks

 

 

 

Global Top Stock IdeasTOP LONG & TOP SHORT STOCK IDEAS FOR GLOBAL MARKETSMONTHLY TOP IDEAS FROM OUR MULTI-FACTOR QUANTITATIVE MODELS
Global Top Stock IdeasTOP LONG & TOP SHORT STOCK IDEAS FOR GLOBAL MARKETSMONTHLY TOP IDEAS FROM OUR MULTI-FACTOR QUANTITATIVE MODELS