Lcaron; Pástor, uboš; Stambaugh, Robert F. - In: Journal of Political Economy 120 (2012) 4, pp. 740-740
We argue that active management’s popularity is not puzzling despite the industry’s poor track record. Our explanation features decreasing returns to scale: As the industry’s size increases, every manager’s ability to outperform passive benchmarks declines. The poor track record occurred...