Returns from Active Management in International Equity Markets:
Evidence From a Panel of UK Pension Funds

Allan Timmermann and David Blake


This paper proposes new performance decomposition measures that allow us
to analize the sources of returns on the international equity holdings of a large
cross-section of UK pension funds. Our results suggest that the pension funds
earned are negative returns both from international market timing and from
selecting stocks within individual foreign regions. The average fund underperformed
a passive global equity benchmark by 70 basis points per annum. This substantially
greater than UK pension fund’s under-perfomance in their domestic equity market.
We discuss the implications of these findings for theories of informational asymmetries
in international stock markets.

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