Performance of Enhanced Index and Quantitative Equity Funds

We examine the performance of "enhanced index" and "quantitative equity funds". Both types of funds use quantitative models in investment selection. Enhanced index funds set an explicit objective to outperform a benchmark index. Proponents of quantitative funds argue that their management style takes human emotions out of the investment decision-making process and leads to more objective stock selection. We find evidence of outperformance by quantitatively managed growth funds, especially those investing in small cap stocks. Copyright 2005 by the Eastern Finance Association.