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A critical assumption in that view is that the returns on actively and passively managed funds are independent. Are they, or are the passive funds freeriding on
by punee 12y ago
A critical assumption in that view is that the returns on actively and passively managed funds are independent. Are they, or are the passive funds freeriding on the work of the active funds?
- ddeck 12y agoThey are certainly not independent given they are allocating between the same underlying investments, but I fail to see how they are freeriding given the data. Many have looked at this and presented the data far more eloquently than I could: https://hbr.org/2013/05/just-how-useless-is-the-asset/ https://hbr.org/2013/05/just-how-useless-is-the-asset/ http://www.umass.edu/preferen/You%20Must%20Read%20This/MalkielJEP2013.pdf http://www.umass.edu/preferen/You%20Must%20Read%20This/Malki...
- punee 12y agoActive funds incorporate new data in the market thereby making it more efficient, which benefits passive funds, no?