TITLE

Spotlighting Common Methodological Biases in Active-Vs.-Passive Studies

AUTHOR(S)
Blanchett, David M.; Israelsen, Craig L.
PUB. DATE
November 2007
SOURCE
Journal of Financial Planning;Nov2007, Vol. 20 Issue 11, p64
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
The debate over active versus passive investing is confounded by several issues that are not always recognized or dealt with properly. Our article highlights the deficiencies common in studies on the benefits of active management, which include (1) problematic survivor bias methodology, (2) counting funds rather than fund assets, (3) not accounting for multiple share classes, and (4) using a single index to represent passive index performance. This last issue is often referred to as index dependency. A recent article by Holmes (2007) dealing with the active-versus-passive debate contained several of these potential deficiencies, which likely influenced the results. We find considerable variation in the percentage of actively managed funds that beat indexes based on what indexes are used as benchmarks. Moreover, there are material differences in the results when using asset-weighted performance data of actively managed funds rather than simply conducting a head count, and when properly accounting for funds with multiple share classes.
ACCESSION #
27518315

 

Related Articles

  • Nick Cann: Advisers need to demonstrate their alpha. Cann, Nick // Money Marketing (Online Edition);2/8/2013, p17 

    The article presents the author's views on the significance of demonstrating the concept of alpha in investment management. The author explains that financial advisers must demonstrate the additional value they bring clients who are identified as the most important person in the business...

  • Expect the Unexpected. McGee, Suzanne // Financial Planning;Feb2006, Vol. 36 Issue 2, p83 

    Discusses the importance for financial planners to anticipate and prepare for the unexpected things that can happen to their clients. Experience of Grant Rawdin, president of Wescott Financial Advisory Group, with a client who died unexpectedly when his client's employer changed life insurance...

  • how to pick a pro for your financial game plan. Dunne, Rebecca // Women in Business;Nov/Dec2004, Vol. 56 Issue 6, p18 

    Deals with the factors an individual should consider in selecting the right financial planning professional. Advantage of working with a financial planner; Primary responsibility of a financial planner; Role of financial planner in the setting of goals; Things a planner should do before making...

  • Nick Cann: Independent thinking needed on independence.  // Money Marketing (Online Edition);3/19/2012, p29 

    The article presents the author's views on the need for independent and restricted financial advice. He comments that there is a strong emotional attachment to the philosophy of independence. He remarks whether the client is seeking independence or an individual and business they can trust to...

  • Making Money. Eisenberg, Lee // Personal Excellence Essentials;Sep2006, Vol. 11 Issue 9, p8 

    The article discusses the different kinds of financial planner. A person falls in either of the four basic personality types: the procrastinator, the plucker, the plotter or the prober. With life expectancy becoming longer, it is necessary to have a financial plan. It is likewise important to...

  • THEY KNOW MONEY. Hannon, Kerry // Washingtonian Magazine;Nov2012, Vol. 48 Issue 2, p93 

    The article offers tips on investment and financial management. It suggests hiring a good adviser to help create a long-term financial plan to protect oneself. Some factors to consider when hiring a financial planner or an investment adviser include determining their fees and whether they can...

  • Consumers Want Advisers to Focus on Financial Planning.  // Insurance Broadcasting;8/22/2013, p1 

    The article focuses on a survey by Certified Financial Planner Board of Standards Inc. in August 2013 which reveals that Americans want a financial adviser who offers entire financial planning services. It reflects on an online survey by research firm ORC International Ltd., according to which...

  • The Ultimate FUND GUIDE.  // Money;Feb2005, Vol. 34 Issue 2, p87 

    This article introduces a section on investments and financial planning. In 2004, most investors made money. Smart fund investing is about devising a plan, implementing it with reliable, low-cost funds and staying the course. This fund guide from "MONEY" magazine presents a new list of...

  • Performance Dispersion–Why It Matters. SUNDT, JON // Investment Advisor;Mar2013, Vol. 33 Issue 3, p18 

    The article offers the author's perspective regarding the importance of performance dispersion in financial investment. It mentions that the range of performance results of funds of managers within a sector is measured by performance dispersion and notes that it can vary tremendously among asset...

Share

Read the Article

Courtesy of VIRGINIA BEACH PUBLIC LIBRARY AND SYSTEM

Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics