WHY THE EFFICIENT MARKET OFFERS HOPE TO ACTIVE MANAGEMENT*

Peter L. Bernstein

Journal of Applied Corporate Finance, 1999, vol. 12, issue 2, 129-136

Abstract: This article provides an interesting resolution of the paradox at the heart of efficient markets theory: namely, in financial markets that appear to be becoming ever more efficient, with fewer and fewer fund managers able to beat the S&P 500, why do investors engage in active trading? Why not index? The key to the author's defense of active management lies in its critique of economists' concept of “equilibrium prices.”

Date: 1999
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