Market efficiency prevails when many investors are willing to depart from maximum diversification, or a passive strategy, by adding mispriced securities to their portfolios in the hope of realizing abnormal returns. The competition for such returns ensures that prices will be near their “fair” values. Most managers will not beat the passive strategy on a riskadjusted basis. However, in the competition for rewards to investing, exceptional managers might beat the average forecasts built into market prices | Primis Online Finance Course Investments Instructor David Whitehurst UMIST Volume 2 McGraw-Hill Irwin A Dhrision of The McGraw-Hill Companies McGraw-Hill Primis ISBN 0-390-32002-1 Text Investments Fifth Edition Bodie-Kane-Marcus This book was printed on recycled paper. Finance http primis online Copyright 2003 by The McGraw-Hill Companies Inc. All rights reserved. Printed in the United States of America. Except as permitted under the United States Copyright Act of 1976 no part of this publication may be reproduced or distributed in any form or by any means or stored in a database or retrieval system without prior written permission of the publisher. This McGraw-Hill Primis text may include materials submitted to McGraw-Hill for publication by the instructor of this course. The instructor is solely responsible for the editorial content of such materials. 111 FINA ISBN 0-390-32002-1 Finance Volume 2 Bodie-Kane-Marcus Investments Fifth Edition VII. Active Portfolio Management 919 27. The Theory of Active Portfolio Management 919 Back Matter_942 Appendix A Quantitative Review 942 Appendix B References to CFA Questions 978 Glossary 980 Name Index 992 Subject Index 996 .
