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← The Arithmetic of Active Management
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Question
What is the basis of Sharpe's argument for passive investing in "The Arithmetic of Active Management"?
1
A mathematical identity: active investors collectively own the market, so aggregate active returns must equal market returns before costs
2
Empirical evidence showing that most active managers have underperformed over the past 20 years
3
The finding that stock-picking skill is randomly distributed and cannot be identified in advance
4
Behavioural evidence that active managers make emotional decisions
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