Can trading activity by managers of high-risk mutual funds make a positive contribution to investor utility? Stochastic dominance is used to compare the returns of high-turnover funds with those of low-turnover funds. This approach avoids the limitations of a mean/variance or regression approach and minimizes problems of survivorship bias. The results show that high-turnover groups dominate low-turnover groups, or at least are equally attractive to risk-averse investors. Active portfolio management can enhance investor utility, even when the costs of obtaining and exploiting costly information are taken into account.
Read the Complete Article in Financial Analysts Journal
Financial Analysts Journal
CFA Institute Member ContentPublisher Information
Association for Investment Management and Research
4 pages doi.org/10.2469/faj.v50.n3.66ISSN/ISBN: 0015-198X
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