Active versus Passive Investment : A China and Hong Kong comparison
Abstract: Investors have been debating whether active or passive management is the better strategy for a very long time where the majority conclude passive investment the most beneficial strategy in terms of after cost. Due to limited research in emerging markets, this study examines whether active or passive management is the most remunerative strategy in mainland China and Hong Kong, considering the difference in attributes between the regions. Historical data for the Hang Seng Index (HSI) and the Shanghai Stock Exchange Composite Index (SSE Composite Index) was used for representing passive funds. To illustrate active management, historical data for 10 active funds for each region were collected. By using two methods including a simple observation of historical returns and a regression analysis, the results of this study conclude that no distinct difference can be confirmed between the two regions when regarding whether the active or passive investment strategy is more beneficial. And in obedience with the majority of previous literature, passive investments outperform active management in both mainland China and Hong Kong.
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