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Practical Applications

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Practical Applications of The Bad Arithmetic of Active Management

Brian J. Jacobsen
Practical Applications 5 (2) DOI: https://doi.org/10.3905/pa.2017.5.2.233
Brian J. Jacobsen
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Practical Applications Summary

As the debate between active and passive investors continues, it is useful to take a look back at the history of investment performance analysis. In The Bad Arithmetic of Active Management Brian Jacobsen of Wells Fargo Funds Management takes a critical look at a touchstone of received wisdom on the issue of active versus passive investing, William Sharpe’s classic article, The Arithmetic of Active Management .

The problem isn’t that Sharpe miscalculated, but that his categories are misnomers, and the assumptions that underpin them are deeply flawed. So even though the numbers add up, they can’t help you make the right choices between active and passive investments. In this interview with Institutional Investor Journals, Jacobsen explains why and what should be done to improve our analytical frameworks.

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  • The content is made available for your general information and use and is not intended for trading or other specific investment advice purposes or to address your particular requirements. We do not represent or endorse the accuracy or reliability of any advice, opinion, statement, or other information provided any user of this publication. Reliance upon any opinion, advice, statement, or other information shall also be at your own risk. Independent advice should be obtained before making any such decision. Any arrangements made between you and any third party named in this publication are at your sole risk.
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Practical Applications: 5 (2)
Practical Applications
Vol. 5, Issue 2
31 Oct 2017
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Practical Applications of The Bad Arithmetic of Active Management
Brian J. Jacobsen
Practical Applications Oct 2017, 5 (2) DOI: 10.3905/pa.2017.5.2.233

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Practical Applications of The Bad Arithmetic of Active Management
Brian J. Jacobsen
Practical Applications Oct 2017, 5 (2) DOI: 10.3905/pa.2017.5.2.233
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    • Practical Applications Summary
    • Overview
    • Practical Applications
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    • Practical Applications Report
    • THE ELUSIVE MARKET PORTFOLIO
    • THE HIDDEN ACTIVITY IN PASSIVE INVESTING
    • ACTIVE MANAGERS GET A BAD RAP
    • FINANCIAL PLANNING IN THE REAL WORLD
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