Does active management add value? New evidence from a quantile regression

While it has been long recognized that active management represents an important issue related to mutual fund performance, little has been agreed about the value added by managers from their abilities point of view. This study attempts to explore both fund and manager characteristics in order to understand their influence on the efficiency achieved for a sample of Spanish mutual funds. We explore these issues in a two-stage approach, considering partial frontier estimators (order-m and order-) to assess performance in the first stage, and regression quantiles for isolating the determinants of efficiency in the second stage. Our findings shed light mainly on investors’ concerns because differences among both funds and managers do actually arise. Our analysis provides some arguments as a guide for selecting both funds as well as some managerial features. In addition, some of the performance differences found among funds are rather intricate because both the magnitude of the estimated regression coefficients and their significance vary depending on the quantile of the distribution of funds’ performance.