RT Journal Article
SR Electronic
T1 Five Myths of Active Portfolio Management
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 27
OP 31
DO 10.3905/jpm.2005.500350
VO 31
IS 3
A1 Jonathan B. Berk
YR 2005
UL https://pm-research.com/content/31/3/27.abstract
AB Five myths are debunked here. It is not true that: the return investors earn in an actively managed fund measures the skill level of the manager; the average active manager is not skilled and therefore does not add value; if managers are skilled their returns should persist—they should be able to consistently beat the market; in light of evidence that there is little or no persistence in actively managed funds' returns, investors who pick funds on the basis of past returns are not behaving rationally; and finally, because most active managers' compensation does not depend on the return they generate, their compensation is not performance–based.