Rethinking Active Management in the US Large-Cap Market
The assumption that equity markets are a 'zero-sum game' has been challenged by new research.
The zero-sum game argument suggests that active managers cannot beat passive strategies and can only win when other active managers lose.
The most popular argument used against active management, the so-called zero-sum game argument, is also the most abused, misused, and misunderstood.
However, research into changes in the structure and participants of stock markets indicates that active managers may have greater opportunities to outperform in the future.
There are two types of investors: active and passive. Passive investors earn the market return, and active investors, in aggregate, must also earn the market return.
- Active investors
- Passive investors
Author's summary: Active management can outperform in the US large-cap market.
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