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 | | It is, of course, possible for the average professionally or institutionally actively managed dollar to outperform the average passively managed dollar, after costs, For this to take place, however, the non-institutional, individual investors must be foolish enough to pay the added costs of the institutions' active management via inferior performance. |
 | | To compute the latter, each manager's return should be weighted by the dollars he or she has under management at the beginning of the period. |
 | | As a result, the "average active manager" tends to be beaten badly in periods when small-capitalization stocks underperform large-capitalization stocks, but may exceed the market's performance in periods when small-capitalization stocks do well. |
| www.stanford.edu /~wfsharpe/art/active/active.htm (1585 words) |
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