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Why Might Investors Choose Active Management?

Warren, Geoffrey; Foster, Douglas Frederick


We investigate why investors may be willing to participate in active management, notwithstanding that the average manager is likely to generate negative alpha after fees. We model the alpha an investor expects from a dynamic strategy of investing in a portfolio of active investment managers, and the fee they are willing to pay for this strategy. The investor considers their ability to select good managers, and anticipates replacing managers when alpha expectations fall either due to a loss of...[Show more]

CollectionsANU Research Publications
Date published: 2013
Type: Journal article
Source: Journal of Behavioral Finance
DOI: 10.2139/ssrn.1767543


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