https://www.etf.com/sections/index-inve ... nopaging=1
Some people believe that active management may still have a role in the supposedly “inefficient” markets. Larry blows this concept out of the water by looking at active versus passive in emerging markets. He also addresses a huge issue that we should all be aware of in active versus passive comparisons, survivorship bias.
We should all appreciate that in the supposed inefficient markets such as small caps or emerging where some people think active may have an advantage, the cost hurdles for active are substantially higher. So if there is any informational advantage for active in these corners of the market, it is eradicated by the increased costs to trade and exploit. References to SPIVA Scorecards, Bogle’s Cost Matters Hypothesis, and Sharpe’s Arithmetic Of Active Management.
Dave
Larry Swedroe: Active Managers Fall Short In Emerging Markets
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Re: Larry Swedroe: Active Managers Fall Short In Emerging Markets
Random Walker wrote: ↑Mon Oct 29, 2018 8:35 am https://www.etf.com/sections/index-inve ... nopaging=1
Some people believe that active management may still have a role in the supposedly “inefficient” markets. Larry blows this concept out of the water by looking at active versus passive in emerging markets. He also addresses a huge issue that we should all be aware of in active versus passive comparisons, survivorship bias.
We should all appreciate that in the supposed inefficient markets such as small caps or emerging where some people think active may have an advantage, the cost hurdles for active are substantially higher. So if there is any informational advantage for active in these corners of the market, it is eradicated by the increased costs to trade and exploit. References to SPIVA Scorecards, Bogle’s Cost Matters Hypothesis, and Sharpe’s Arithmetic Of Active Management.
Dave
Re: Larry Swedroe: Active Managers Fall Short In Emerging Markets
I would point out that not all indexes are created equal. There are different Emerging Markets indexes and they are constituted in different ways. Some controversy as to how much China should be weighted in these indexes as China isn't really open or transparent. I have joked that Bogleheads don't stock pick anymore but pick Indexes. Having some fun here, but Vanguard has actually switched indexes for many of their funds and I have poked fun here too. Also, there are indexes that perform better than others, depending upon how they select which stocks should be in the indexes.
A fool and his money are good for business.