On the Size of the Active Management Industry

Robert Stambaugh and Pástor, Luboš
Authors registered in the RePEc Author Service: Lubos Pastor

No 7637, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We analyze the equilibrium size of the active management industry and the role of historical data---how investors use it to decide how much to invest in the industry, and how researchers use it to judge whether the industry's size is reasonable. As the industry's size increases, every manager's ability to outperform passive benchmarks declines, to an unknown degree. We find that researchers need not be puzzled by the industry's substantial size despite the industry's negative track record. We also find investors face endogeneity that limits their learning about returns to scale and allows prolonged departures of the industry's size from its optimal level.

Keywords: Active management; Learning; Returns to scale (search for similar items in EconPapers)
JEL-codes: G11 G12 G20 G23 (search for similar items in EconPapers)
Date: 2010-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Journal Article: On the Size of the Active Management Industry (2012)
Working Paper: On the Size of the Active Management Industry (2010)
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