IDEAS home Printed from https://ideas.repec.org/a/taf/ufajxx/v54y1998i5p18-31.html
   My bibliography  Save this article

Allocating between Active and Passive Management

Author

Listed:
  • Eric H. Sorensen
  • Keith L. Miller
  • Vele Samak

Abstract

With the recent difficulty in beating the S&P 500 Index, the debate over active versus passive investing has risen to a new level of importance. We provide a framework for analyzing the trade-off the typical pension fund faces in deciding how much to index. Our analysis gets at the root of active performance—stock-picking skill. After analyzing the performance associated with various degrees of skill in various equity styles for the 1985–97 period, we found that a modest amount of stock-picking skill goes a long way and that the optimal amount of allocation to indexing declines as skill increases. For most risk categories, however, some allocation to indexing is appropriate.

Suggested Citation

  • Eric H. Sorensen & Keith L. Miller & Vele Samak, 1998. "Allocating between Active and Passive Management," Financial Analysts Journal, Taylor & Francis Journals, vol. 54(5), pages 18-31, September.
    • Handle: RePEc:taf:ufajxx:v:54:y:1998:i:5:p:18-31
    DOI: 10.2469/faj.v54.n5.2209
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.2469/faj.v54.n5.2209
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.2469/faj.v54.n5.2209?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:ufajxx:v:54:y:1998:i:5:p:18-31. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/ufaj20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.