WHETHER INVESTING IS PRIMARILY AN ART OR A SCIENCE HAS long been a favorite topic of informal discussion among professional investment managers, perhaps because the discussions typically are resolved quite cheerfully by demonstrating that since the practice of investing is clearly not a science, it therefore must be an art.

Anyone who has observed gifted investors at work will recognize the art—subtle, intuitive, complex, and usually inexplicable—in selecting individual stocks or groups of stocks. The few great artists are true heroes of the profession who add value to portfolios by seeing and seizing opportunities others miss or recognize only later.

However, for most investment managers, portfolio management is ...

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