Why Active Managers Have Trouble Keeping Up with the Pack

PLEASE NOTE
Capital Ideas is now Chicago Booth Review but unfortunately original articles are no longer available. If you click through you will be taken to the Internet Archive site to find an archived copy.

There is no shortage of money managers who claim they can beat market benchmarks, some with impressive track records. And one stream of research suggests that some people can identify and profit from mispriced securities in the stock market. Chicago Booth Professor Lubos Pastor believes that money managers are not only skilled, but becoming ever more skilled over time. So should you dump your index funds and buy actively managed ones? Not so fast.

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