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Why The Efficient Market Offers Hope To Active Management

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  • Peter L. Bernstein

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.”

Suggested Citation

  • Peter L. Bernstein, 1999. "Why The Efficient Market Offers Hope To Active Management," Journal of Applied Corporate Finance, Morgan Stanley, vol. 12(2), pages 129-136, June.
    • Handle: RePEc:bla:jacrfn:v:12:y:1999:i:2:p:129-136
    DOI: 10.1111/j.1745-6622.1999.tb00014.x
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    Cited by:

    1. Paul Davidson, 2007. "Is a Plumber or a New Financial Architect Needed to End global International Liquidity Problems?," Palgrave Macmillan Books, in: Interpreting Keynes for the 21st Century, chapter 1, pages 3-27, Palgrave Macmillan.
    2. Haberer, Markus, 2004. "Might a Securities Transactions Tax Mitigate Excess Volatility? Some Evidence From the Literature," CoFE Discussion Papers 04/06, University of Konstanz, Center of Finance and Econometrics (CoFE).
    3. Sophie van Huellen, 2020. "Approaches To Price Formation In Financialized Commodity Markets," Journal of Economic Surveys, Wiley Blackwell, vol. 34(1), pages 219-237, February.
    4. Jiang, Jinjin & Li, Haiqi, 2020. "A new measure for market efficiency and its application," Finance Research Letters, Elsevier, vol. 34(C).
    5. Nuttall, John, 2006. "Asset allocation approach to understanding stock market dynamics," MPRA Paper 2504, University Library of Munich, Germany.

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