Performance Implications of Active and Passive Portfolio Strategies in Emerging Economies

Abstract

This study investigates the comparative performance of active and passive portfolio management strategies in emerging economies. Using data from equity markets across 15 emerging countries between 2010 and 2024, the research evaluates risk-adjusted returns, volatility, and Sharpe ratios of actively managed funds versus passive index-tracking portfolios. Panel regression and performance decomposition analyses reveal that while active management occasionally outperforms in high-volatility or low-liquidity environments, passive strategies consistently provide superior risk-adjusted returns over the long term. The findings highlight the importance of market efficiency, liquidity, and transaction costs in determining strategy effectiveness, offering empirical guidance for investors and fund managers in emerging market contexts.