Posted by: Matthias Paul Kuhlmey
What really constitutes a return? If I want to be a geek about exploring this question, PhDs Richard Grinold and Ronald Kahn offered a more-than-exemplary answer in their 1999 publication, Active Portfolio Management: A Quantitative Approach for Producing Superior Returns and Controlling Risk. In near-Einstein fashion, these two masterminds broke down the complexity of this topic into one simple formula, referred to as “The Fundamental Law of Active Management”: Investment Return = Skill * Opportunity.
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