Performance Evaluation and Attribution of Security Portfolios

Chapter 9

Active Management in Mostly Efficient Markets: A Survey of the Academic Literature

Abstract

This chapter surveys the academic literature on the value of active management, using the latest performance evaluation techniques—many of which are described in earlier chapters of this book. The results show that the average active manager does not outperform, but that a significant minority of active managers do add value. Further, academic studies indicate that investors may be able to identify superior active managers (SAMs) in advance using public information. Investors who can identify SAMs should be able to improve their overall Sharpe ratio by including a meaningful exposure to active strategies.

Keywords

Active portfolio management, efficient ...