Modern Fool’s Gold: Alpha in Recessions

Abstract

Investors continue to chase past returns and active portfolio management despite evidence that suggests a passive investment strategy is generally superior. Prior research claims that active fund managers add alpha in recessions. Findings in this article suggest that alpha from active managers is isolated to a subset of the manager universe.Further, the authors conclude that this outperformance displays weak persistence and that there is no meaningful impact of prior superior performance in recessions on performance in subsequent recessions or expansions.