Active vs Passive Portfolio Management in Norway - a study Management in Norway - a study

Abstract

This paper investigates whether money managers in Norway outperform their respective benchmarks and create value for their investors. To get a better understanding of this, an aggregated portfolio of Norwegian mutual funds is examined for persistence in their returns using the Fama-French five-factor model. Further is the Henriksson-Merton market timing factor added to the model to observe if the mutual funds are able to predict good and bad market conditions. When accounting for the five-factor model, the abnormal return drops from 0.47% to 0.14 % p.a. compared to a simple model only controlling for the market factor, not considering fees. The results are rarely significant and do not show any conclusive evidence of positive persistent returns among the top performing funds, nor negative persistent returns among the worst performing funds. In general, the sample exhibit negative but insignificant market timing ability.