Active Share Efficiency is the ratio of a portfolio’s excess return for a given quarterly period to its active share at the end of the period.
Where Re is excess return (expressed as an integer) and AS is Active Share (measured as a decimal). Similar to other measures, it can be viewed as an average excess return over multiple time periods (average rolling periods) as to limit endpoint sensitivity. In that case, the formula would change slightly, (where n equals number of periods) to include average excess return divided by average active share:
Investors who are required to select and monitor investment managers should develop a basic understanding of investment statistics. Quantitative tools can provide you with good insight that you can use in your qualitative interviews with managers and when monitoring your investments.