The Myth of the Monkey

摘要

This article considers whether asset managers provide economic benefit even though their excess returns, on average, at best equal zero. A simple thought experiment demonstrates that they do. Although researchers have studied efficiency via competition across firms, a more general definition of market efficiency is where the industry total product reaches a maximum. Market efficiency has little to do with managers' average excess returns-that is, whether managers beat an index. This is easy to see when asset management, and financing activities in general, are modeled as a type of production function and exist as a part of the real economy.