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OPINION

Funds' failure

Funds' failure
December 13, 2016
Funds' failure

Years ago, when Burton Malkiel was first making the case against active fund managers, the answer seemed clear. Stock markets, it was thought, were efficient: all information is immediately embedded into share prices and so fund managers can't know more than the market.

Today, though, this answer is inadequate. Markets don't seem entirely efficient. In fact, Heiko Jacobs and Sebastian Muller have listed no less than 138 deviations from efficiency, such as momentum and defensive effects and the ability of various accounting measures to predict returns, such as accruals or Joseph Piotroski's F-scores.

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