ACTIVE VS. PASSIVE MUTUAL FUND PERFORMANCE IN THE NORWEGIAN MARKET

Abstract

This master thesis examines the performance of active mutual funds in Norway and explores whether actively managed funds consistently outperform passive index funds net of fees. By analyzing a survivorship bias free dataset of 109 active funds spanning the period 1993-2023, we adopt a comprehensive approach to assess the aggregate and individual performance of these funds, while also distinguishing between luck and skill. Our findings reveal that, on aggregate, active fund managers produce a monthly alpha of 30 bps, although being statistically insignificant when employing the Fama-French model. Further, upon examining each individual fund, our findings indicate that a mere 11% of the active funds exhibit outperformance. Our bootstrap analysis provides compelling evidence attributing the observed outperformance to chance rather than skill. Furthermore, our examination of the cross-sectional distribution of alphas reveals the presence of ten fund products exhibiting underperformance in the left tail contributory to skill.