Aurora Borealis
18 July 2019 Financial Analysts Journal Volume 75, Issue 4

Challenging the Conventional Wisdom on Active Management: A Review of the Past 20 Years of Academic Literature on Actively Managed Mutual Funds

  1. K.J. Martijn Cremers
  2. Jon A. Fulkerson
  3. Timothy Brandon Riley, CFA

Just over 20 years have passed since the publication of Mark Carhart’s landmark 1997 study on mutual funds. Its conclusion—that the data did “not support the existence of skilled or informed mutual fund portfolio managers”—was the capstone of an academic literature, which began with Michael Jensen in 1968, that formed the conventional wisdom that active management does not create value for investors. We review the literature on active mutual fund management since the publication of Carhart’s work to assess the extent to which current research still supports the conventional wisdom. Our review of the most recent literature suggests that the conventional wisdom is too negative on the value of active management.

Read the Complete Article in Financial Analysts Journal Financial Analysts Journal CFA Institute Member Content

We’re using cookies, but you can turn them off in Privacy Settings.  Otherwise, you are agreeing to our use of cookies.  Accepting cookies does not mean that we are collecting personal data. Learn more in our Privacy Policy.