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Why Do Active Managers Do Better in Some Periods Than Others? (Part 2)

The results of putting Dunn’s Law to the test.

Alex Bryan 10.04.2018

In part 1 of this article, we set the scene of putting Dunn’s Law to the test. In part 2, we will look at the results.

Results
The results of this analysis demonstrate that differences in investment style between U.S. active and index funds can help explain the variation in success rates. However, the data did not clearly follow all the predictions of Dunn's Law.

The nine U.S. equity categories offer a cleaner test of Dunn's Law than the two international-stock categories because the index funds in each category have specific style constraints and are likely more style pure than their active counterparts.

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About Author

Alex Bryan

Alex Bryan  Alex Bryan, CFA is the Director of Passive Fund Research with Morningstar.

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