Practical analysis for investment professionals

Active vs. Passive Investing


Eugene Fama: Stick with Basic Factors

Have the advances in technology, computing power, and data made the markets more efficient? It’s “not clear,” according to Nobel laureate Eugene Fama.

The Active Equity Renaissance: New Frontiers of Risk

One modern portfolio theory (MPT) pillar that is unquestionably broken is the use of volatility, specifically standard deviation, as a measure of risk, Jason Voss, CFA, and C. Thomas Howard write in the latest edition of The Active Equity Renaissance series. This initial error in MPT's development is a major contributor to active investment management underperformance.

To Compete with Robos, Advisers Must Become Financial Physicians

Can robo-advisers replace human advisers? Not if the goal of the relationship is to increase clients' well-being, says Meir Statman. Why? Because that requires human interaction.

The Active Equity Renaissance: Rejecting a Broken 1970s Model

Collectively, active equity delivers no value to its investors and, in fact, extracts value from them. So what can be done to launch an active equity renaissance?

The Golden Age of Hedge Funds

How many of the hedge funds out there are actually worth investing in? Ben Carlson, CFA, explores the question.

Where Active Management Can Win

Active fund management is alive, thriving, and adding value across trillions of dollars of assets worldwide.

Research Analysts Add Value: Here’s Proof

Post-event analyst forecasts — those made subsequent to recent results or management guidance — are significantly more accurate than management forecasts, reports Jeremy Monk. And if analysts can provide insight into tangible measures of value, then we can presume they are also able to offer insight into other, less tangible measures of value, such as management quality and industry outlook.

Book Review: The Index Revolution

Author Charles Ellis, CFA, contends that structural changes in the US market have eliminated the prospect of outperforming average market returns, after fees, through active management. The causes include the rise in institutional and high-speed machine trading and changes in regulation. Active management may still pay off in low-efficiency markets, such as high-yield bonds and emerging market debt. The book does not address findings that the most active stock pickers who take large but diversified positions unlike the index weightings beat their benchmarks.

Best of 2016: Active Management Fights Back

Mark Harrison, CFA, provides a list of the most popular articles of 2016 from CFA Institute's Financial Analysts Journal and CFA Digest.

Weekend Reads for Investors: The Passive vs. Active Debate Continued

The cold war between passive and active investing has heated up considerably in the last two years, writes Jason Voss, CFA. He offers more insight on this, as well as other picks in this week's edition of Weekend Reads for Investors.



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