The relationship between equity earning yields and bond yields.

The financial market is a vast arena where participants buy and sell securities based on their beliefs and financial needs. While some investors prefer active management, which deviates from market weights, others opt for passive management, which mirrors the market weights. The concept of active versus passive management has been a topic of debate for…

The common perception is that if one invests in ETFs or indices like the S&P 500, one is being “passive”. The media has additionally confused the definition by considering any rule-based or systematic strategy as passive investing. This poor understanding has led many investors astray, creating passive portfolios with poor diversification. Furthermore, it has introduced…

Active investing is an investment strategy in which investors trade based on preferences to outperform a given market. The market can be US stocks, international bonds, art, etc. In contrast, the purpose of passive investing is to match the market return. For example, to accurately match the return of the US stock market, a passive…

Participants in financial markets are engaging in a zero-sum game. Someone must underperform for any investor to generate excess returns over the market. Alpha works the same way; for every manager that has produced positive alpha, there must be someone that produced negative alpha. Yet, we know superstar managers who have made their clients rich.…