When Active Pays Off: The Role of Active Share in Turbulent Markets

Sammanfattning

This paper examines the role of Active Share in Swedish equity mutual funds across varying market conditions. Using quarterly holdings and daily returns from the end of 2018 to the end of 2024, we compute Active Share for all-equity mutual funds domiciled in Sweden that invest in Europe and match them to appropriate benchmarks. We find no consistent relationship between Active Share and excess return throughout our sample period. However, during periods of elevated uncertainty, most notably the COVID-19 crisis, funds with high Active Share significantly outperform their benchmarks, while no such evidence exists for funds with lower Active Share. These results suggest that the relevance of Active Share is context-dependent and particularly significant in turbulent markets. Our findings imply that investors and fund managers should consider Active Share a meaningful indicator primarily during periods of heightened uncertainty.