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The Journal of Wealth Management

The Journal of Wealth Management

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Article

Risk-Adjusted Performance of the Largest Active ETFs

Kristine L. Beck, James Chong and G. Michael Phillips
The Journal of Wealth Management Winter 2017, 20 (3) 52-63; DOI: https://doi.org/10.3905/jwm.2017.20.3.052
Kristine L. Beck
is an assistant professor at California State University, Northridge in Northridge, CA. kristine.beck@csun.edu
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James Chong
is a professor at California State University, Northridge in Northridge, CA, and a research economist at MacroRisk Analytics in Pasadena, CA. jchong@macrorisk.com
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G. Michael Phillips
is a professor at California State University, Northridge in Northridge, CA, and chief scientist at MacroRisk Analytics in Pasadena, CA. mphillips@macrorisk.com
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Abstract

This study examines the performance of the 10 largest active exchange-traded funds. Using Jensen’s alpha, 50% of the largest active ETFs underperform their passive benchmarks, for both default and specific indexes. This implies that active ETFs are not appropriate as stand-alone investments. On the other hand, as part of a portfolio consisting of an active ETF, a benchmark index, and a risk-free asset, active ETFs play an integral role in the outperformance of the portfolio over the benchmark. This suggests that, for the purposes of enhanced risk-adjusted performance, active ETFs are better suited in a portfolio setting.

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The Journal of Wealth Management: 20 (3)
The Journal of Wealth Management
Vol. 20, Issue 3
Winter 2017
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Risk-Adjusted Performance of the Largest Active ETFs
Kristine L. Beck, James Chong, G. Michael Phillips
The Journal of Wealth Management Oct 2017, 20 (3) 52-63; DOI: 10.3905/jwm.2017.20.3.052

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Risk-Adjusted Performance of the Largest Active ETFs
Kristine L. Beck, James Chong, G. Michael Phillips
The Journal of Wealth Management Oct 2017, 20 (3) 52-63; DOI: 10.3905/jwm.2017.20.3.052
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    • EVOLUTION OF THE ETF INDUSTRY
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