ACTIVE MANAGEMENT: WHAT DIFFERENT STORY MEASURES TELL US IN BRAZIL?

Resumo

This paper extends the debate about the evaluating the active portfolio management in order to guide academics and practitioners undertaking researches about the contribution of active management on the performance in equity mutual funds in the Brazilian market. We present a comparison between two measures of active management: Churn Rate and Active Share. Using five year-data set covering the Brazilian equity mutual funds, between 2007 and 2011, we estimate econometric models to find the relation between active management and performance. The results evidence that Churn Rate presents a negative relationship to performance, while the Active Share has a positive effect for the same period. Based on our results we can state that a combined-measure analysis can lead us to a better understanding about the type of active management that the manager is involved, avoiding misleading interpretation about the role of each strategy on the portfolio performance.