5 ms·

It is because you assumed it to be the case. What is the basis for the equation where you considered tactive + (1-t)passive = market gain? When are passive and

• azumbeg 6y ago
  They are always equal with my definition, hence the conclusion that active investors, as a whole, perform substantially worse than the market (net of fees). The equation is derived from the fact that there are fundamentally two investing strategies. There's a passive strategy, where an investor holds a representative market index. Anything that deviates from that strategy (with regards to security selection or market timing) is considered an active strategy. "t" is used to denote the share of capital flowing to each strategy, and the total market return is the weighted return (percentage, not absoute) of both.