Deactivating Active Share

The authors investigate “active share,” a measure meant to determine the level of active management in investment portfolios. Using the same sample that was used by Cremers and Petajisto (2009) and Petajisto (2013), they find that active share correlates with benchmark returns but does not predict actual fund returns; within individual benchmarks, active share is as likely to correlate positively with performance as it is to correlate negatively. Their findings do not support an emphasis on active share as a manager selection tool or an appropriate guideline for institutional portfolios.