Author Topic: The math behind "you can't beat the index"?  (Read 11835 times)

mgarf

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Re: The math behind "you can't beat the index"?
« Reply #50 on: June 04, 2017, 02:26:03 PM »
The definitive analysis on this topic was done by Fama and French.

https://famafrench.dimensional.com/essays/luck-versus-skill-in-mutual-fund-performance.aspx

They looked at historical mutual fund performance (and accounted for survival bias). Main conclusion that, accounting for fees, active management only sometimes does better than the index. But this sometimes is as much as you'd expect by plain luck.
« Last Edit: June 04, 2017, 02:28:33 PM by mgarf »

Mighty-Dollar

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Re: The math behind "you can't beat the index"?
« Reply #51 on: June 06, 2017, 03:29:29 AM »
Answer: Efficient Market Hypothesis

CorpRaider

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Re: The math behind "you can't beat the index"?
« Reply #52 on: June 07, 2017, 08:27:46 AM »
I don't buy the EMH, certainly not the strong form.  Even so, the "low cost hypothesis" of Bogle (and others) is really compelling.  Even if you assumed (healthy) 10% nominal equity returns, giving up 1% plus taxes and trading costs of that is a HUGE portion and hurdle.  I'm evolving more into an indexer with a value tilt (or a reduction in the inherent momo tilt in cap weighted indexes).