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.

Editor’s note: The authors may have a commercial interest in the topics discussed in this article.

Editor’s note: This article was reviewed and accepted by Executive Editor Stephen J. Brown.

Author Information

Andrea Frazzini is a principal at AQR Capital Management, LLC, Greenwich, Connecticut.

Jacques Friedman is a principal at AQR Capital Management, LLC, Greenwich, Connecticut.

Lukasz Pomorski is vice president at AQR Capital Management, LLC, Greenwich, Connecticut.

Related Topics

Users who read this article also read


Rate and Share