Contrasting the Performance of Active and Passive Unit Trusts under Normal Market Conditions: Is the Experience of Emerging Markets Different?
The predominant tradition in the literature is to scrutinise the competitive performance of passive and active investment strategies with less regard to the prevailing market climate. The thesis of this paper is that volatile market conditions may necessitate investment strategy adjustments. Such r...
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| Format: | Article |
| Language: | English |
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Vilnius University Press
2024-05-01
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| Series: | Organizations and Markets in Emerging Economies |
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| Online Access: | https://www.journals.vu.lt/omee/article/view/30804 |
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| author | Thabo J. Gopane Mukundi Ravhura |
| author_facet | Thabo J. Gopane Mukundi Ravhura |
| author_sort | Thabo J. Gopane |
| collection | DOAJ |
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The predominant tradition in the literature is to scrutinise the competitive performance of passive and active investment strategies with less regard to the prevailing market climate. The thesis of this paper is that volatile market conditions may necessitate investment strategy adjustments. Such readjustments may confound empirical comparison of passive and active investing if econometric models do not adapt accordingly. Currently, the literature cannot give a stylised fact of whether the historical claims of passive–active relationships relate to normal market conditions or not, which is a flaw. The present study reduces the flagged knowledge gap by answering the question whether passive investment outperforms active investing under normal market conditions. The study applies the parametric and non-parametric risk-adjusted models of the Jensen alpha and Sharpe index. The empirical analysis is based on the weekly returns of 16 unit trusts listed on South Africa’s Johannesburg Stock Exchange for ten years (between 2009 and 2019). Consistent with the hypothesis of inefficient capital markets in developing economies, the study finds that active investing significantly outperforms passive investment strategy under normal market conditions. The results should benefit investors and policymakers in the era of increasing competitiveness, digitalisation, and globalisation.
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| format | Article |
| id | doaj-art-d3b25339d28645eabac134ff252ccead |
| institution | Kabale University |
| issn | 2029-4581 2345-0037 |
| language | English |
| publishDate | 2024-05-01 |
| publisher | Vilnius University Press |
| record_format | Article |
| series | Organizations and Markets in Emerging Economies |
| spelling | doaj-art-d3b25339d28645eabac134ff252ccead2025-01-20T18:21:42ZengVilnius University PressOrganizations and Markets in Emerging Economies2029-45812345-00372024-05-01151(30)10.15388/omee.2024.15.10Contrasting the Performance of Active and Passive Unit Trusts under Normal Market Conditions: Is the Experience of Emerging Markets Different?Thabo J. Gopane0https://orcid.org/0000-0002-4182-7149Mukundi Ravhura1University of Johannesburg, Department of Finance and Investment Management, South AfricaUniversity of Johannesburg, Department of Finance and Investment Management The predominant tradition in the literature is to scrutinise the competitive performance of passive and active investment strategies with less regard to the prevailing market climate. The thesis of this paper is that volatile market conditions may necessitate investment strategy adjustments. Such readjustments may confound empirical comparison of passive and active investing if econometric models do not adapt accordingly. Currently, the literature cannot give a stylised fact of whether the historical claims of passive–active relationships relate to normal market conditions or not, which is a flaw. The present study reduces the flagged knowledge gap by answering the question whether passive investment outperforms active investing under normal market conditions. The study applies the parametric and non-parametric risk-adjusted models of the Jensen alpha and Sharpe index. The empirical analysis is based on the weekly returns of 16 unit trusts listed on South Africa’s Johannesburg Stock Exchange for ten years (between 2009 and 2019). Consistent with the hypothesis of inefficient capital markets in developing economies, the study finds that active investing significantly outperforms passive investment strategy under normal market conditions. The results should benefit investors and policymakers in the era of increasing competitiveness, digitalisation, and globalisation. https://www.journals.vu.lt/omee/article/view/30804market conditionspassive investingactive investingportfolio performanceunit trust |
| spellingShingle | Thabo J. Gopane Mukundi Ravhura Contrasting the Performance of Active and Passive Unit Trusts under Normal Market Conditions: Is the Experience of Emerging Markets Different? Organizations and Markets in Emerging Economies market conditions passive investing active investing portfolio performance unit trust |
| title | Contrasting the Performance of Active and Passive Unit Trusts under Normal Market Conditions: Is the Experience of Emerging Markets Different? |
| title_full | Contrasting the Performance of Active and Passive Unit Trusts under Normal Market Conditions: Is the Experience of Emerging Markets Different? |
| title_fullStr | Contrasting the Performance of Active and Passive Unit Trusts under Normal Market Conditions: Is the Experience of Emerging Markets Different? |
| title_full_unstemmed | Contrasting the Performance of Active and Passive Unit Trusts under Normal Market Conditions: Is the Experience of Emerging Markets Different? |
| title_short | Contrasting the Performance of Active and Passive Unit Trusts under Normal Market Conditions: Is the Experience of Emerging Markets Different? |
| title_sort | contrasting the performance of active and passive unit trusts under normal market conditions is the experience of emerging markets different |
| topic | market conditions passive investing active investing portfolio performance unit trust |
| url | https://www.journals.vu.lt/omee/article/view/30804 |
| work_keys_str_mv | AT thabojgopane contrastingtheperformanceofactiveandpassiveunittrustsundernormalmarketconditionsistheexperienceofemergingmarketsdifferent AT mukundiravhura contrastingtheperformanceofactiveandpassiveunittrustsundernormalmarketconditionsistheexperienceofemergingmarketsdifferent |