The Active World of Passive Investing by David Easley, David Michayluk, Maureen O’Hara, Tālis J Putniņš.Key Findings:
Most ETFs are highly active, with a median Activeness Index of 93.1% and median Active Return Deviation of 8.8% p.a. Most fund flows and trading activity are concentrated on the most active ETFs. ETFs should be viewed as a continuum of products across the passive-active space. As ETFs become more narrowly focused, they may struggle to beat benchmarks. The new generation of ETFs allows for the implementation of complex factor-based and industry-focused strategies. The use of ETFs can potentially enhance the risk-return tradeoff for investors. The success of ETFs has challenged the business model of the active mutual fund industry. As ETFs become more active, their impact on the market is an important area for future research. Citation: David Easley, David Michayluk, Maureen O’Hara, Tālis J Putniņš, The Active World of Passive Investing, Review of Finance, Volume 25, Issue 5, September 2021, Pages 1433–1471, https://bit.ly/3PnS9KP To read the full study please visit; https://bit.ly/3WcxCv7
