Passive Strategies Gaining in Popularity

March 11, 2013

Index-based investment strategies, those that passively invest with the goal of replicating the return pattern of a specific benchmark, were first created and marketed to investors beginning in the early 1970s. The well-known financial concept known as Efficient Market Hypothesis was developed earlier in the 1960s and postulated that it was not possible for an investor to consistently beat market returns on a risk-adjusted basis over time since market prices incorporate all available information. The adoption of this hypothesis by the finance community certainly contributed to the proliferation and validation of passive strategies.

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