Investment strategy: It’s hard to find the winners but maybe easier to identify (and avoid) losers ?
By coincidence, I read the following posts on the same evening:
Picking winners is hard
The Bloomberg article refers to a paper which can be summarized as follows:
But it is much harder to explain why most active equity managers fail to keep up with the benchmark index, a shortcoming that implies these investment professionals are doing something that systematically leads to underperformance.
The answer, we believe, lies in the fact that the best performing stocks in a broad index perform much better than the other stocks in the index, most of which perform relatively badly. That means average index returns depend heavily on the relatively small set of winners.