In an influential piece, Sharpe (1991) put forward the proposition that active investing must be a losing pursuit in aggregate, as it amounts to a zero sum game in gross terms and hence must be a negative sum game after costs. This paper takes a critical look at the underlying concepts and assumptions behind Sharpe’s proposition, and links it to the issue of whether it is worthwhile for investors to consider using active fund managers.

IS ACTIVE INVESTING DOOMED AS A NEGATIVE SUM GAME? A CRITICAL REVIEW

- Geoff Warren | SSRN Electronic Journal | 02 Se...