Comparative Performance: Analysis of Active and Passive Fund Management in Emerging and Developed Markets

Abstract

This thesis investigates the comparative performance of active and passive fund management strategies within emerging and developed markets. Utilizing the Fama-French five-factor model, the study analyzes excess risk-adjusted returns across a diverse portfolio of funds. The research employs a comprehensive dataset containing 5 984 funds, spanning over a 20-year period and incorporating panel regression techniques to account for temporal and cross-sectional variations. Key findings indicate that actively managed funds do not generate higher risk-adjusted returns compared to passively managed funds in both emerging and developed markets, indicating a lack of investment skill among active managers. When accounting for costs and fees, active funds still fail to outperform passive funds, determining that the higher fees do not translate into superior performance. Notably, active management strategies do not have a larger impact in less efficient markets.