{"product_id":"the-quest-for-alpha-isbn-9780470926543","title":"The Quest for Alpha","description":"\u003cb\u003eThe final word on passive vs. active investing\u003c\/b\u003e \u003cp\u003eThe debate on active investing-stock picking and market timing-versus passive investing-markets are highly efficient and almost impossible to outperform-has raged for decades. Which side is right? In \u003ci\u003eThe Quest for Alpha: The Holy Grail of Investing\u003c\/i\u003e, author Larry E. Swedroe puts an end to the debate, proving once and for all that active investing is likely to prove futile as the associated expenses-costs, fees, and time spent analyzing individual stocks and the overall market-are likely to exceed any benefits gained. The book\u003c\/p\u003e \u003cul\u003e \u003cli\u003ePresents research, data, and quotations that reveal it's extremely difficult to outperform the market\u003c\/li\u003e \u003cli\u003eExplains why investors should focus on asset allocation, fund construction, costs, tax efficiency, and the building of a globally diversified portfolio that minimizes, if not eliminates, the taking of idiosyncratic, uncompensated risks\u003c\/li\u003e \u003cli\u003eOther titles by Swedroe: \u003ci\u003eThe Only Guide to Alternative Investments You'll Ever Need and The Only Guide You'll Ever Need for the Right Financial Plan\u003c\/i\u003e\n\u003c\/li\u003e \u003c\/ul\u003e \u003cp\u003eInvestors are on a never-ending search for a money manager who will deliver returns above the appropriate risk-adjusted benchmark, aka the \"Holy Grail of Investing.\" \u003ci\u003eThe Quest for Alpha\u003c\/i\u003e demonstrates that it's a loser's game-while it's possible to win, it's so unlikely that you shouldn't try.\u003c\/p\u003e \u003cp\u003eAcknowledgments xi\u003c\/p\u003e \u003cp\u003eIntroduction xiii\u003c\/p\u003e \u003cp\u003eThe Holy Grail xiv\u003c\/p\u003e \u003cp\u003eThe Quest Begins xvi\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 1 Mutual Funds: The Evidence 1\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eWhen You Wish upon a Morningstar 2\u003c\/p\u003e \u003cp\u003eFocus Funds 4\u003c\/p\u003e \u003cp\u003eActive Management of Bond Funds 6\u003c\/p\u003e \u003cp\u003eSkill versus Luck 8\u003c\/p\u003e \u003cp\u003eWho Cares about the Average Fund? 12\u003c\/p\u003e \u003cp\u003eWith Active Managers, How Long Is Long Enough? 12\u003c\/p\u003e \u003cp\u003eAdvice from Professional Investors and Academics 15\u003c\/p\u003e \u003cp\u003eAdmissions from Industry Practitioners and the\u003c\/p\u003e \u003cp\u003eFinancial Media 17\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 2 Pension Plans: The Evidence 23\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eCounterproductive Activity 25\u003c\/p\u003e \u003cp\u003eThe Value of Consultants 27\u003c\/p\u003e \u003cp\u003eThe Performance of Funds Offered by 401(k) Plans 27\u003c\/p\u003e \u003cp\u003eFund Selection Skills 29\u003c\/p\u003e \u003cp\u003ePlease Don’t Do Something, Stand There 30\u003c\/p\u003e \u003cp\u003eAdvice from Professional Investors 30\u003c\/p\u003e \u003cp\u003eAdmissions from an Industry Practitioner 31\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 3 Hedge Funds: The Evidence 33\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Problems with Hedge Funds 36\u003c\/p\u003e \u003cp\u003eAdvice from Professional Investors and Academics 40\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 4 Private Equity\/Venture Capital:\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Evidence 43\u003c\/p\u003e \u003cp\u003eCharacteristics of Private Equity Returns 46\u003c\/p\u003e \u003cp\u003eBias in the Data 48\u003c\/p\u003e \u003cp\u003eAdvice from a Professional Investor 49\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 5 Individual Investors: The Evidence 51\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eInvestment Returns versus Investor Returns 54\u003c\/p\u003e \u003cp\u003eAdvice from Professional Investors and Academics 56\u003c\/p\u003e \u003cp\u003eAdmissions from Industry Practitioners and the Financial Media 59\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 6 Behavioral Finance: The Evidence 61\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThere Is Smoke, but No Fire 62\u003c\/p\u003e \u003cp\u003eThe Tyranny of the Efficient Markets 63\u003c\/p\u003e \u003cp\u003eFurther Evidence 64\u003c\/p\u003e \u003cp\u003eThe Failed Quest 65\u003c\/p\u003e \u003cp\u003eThe Value of Behavioral Finance 66\u003c\/p\u003e \u003cp\u003eEven Smart People Make Mistakes 66\u003c\/p\u003e \u003cp\u003eAdmissions from Industry Practitioners 68\u003c\/p\u003e \u003cp\u003eSummary 69\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 7 Why Persistent Outperformance Is Hard to Find 71\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Quest for Alpha Is a Game Played on a Different Field 72\u003c\/p\u003e \u003cp\u003eSuccessful Active Management Sows the Seeds of Its Own Destruction 74\u003c\/p\u003e \u003cp\u003eCloset Indexing 76\u003c\/p\u003e \u003cp\u003eConcentration and the Role of Trading Costs 77\u003c\/p\u003e \u003cp\u003eThe Role of Trading Costs 78\u003c\/p\u003e \u003cp\u003eDrifting Out of Small Caps 79\u003c\/p\u003e \u003cp\u003eEncore Performances 79\u003c\/p\u003e \u003cp\u003eWho Gets the Money to Manage? 81\u003c\/p\u003e \u003cp\u003eThe Value of Economic and Market Forecasts 83\u003c\/p\u003e \u003cp\u003eThe Value of “Expert” Judgment 86\u003c\/p\u003e \u003cp\u003eWe All Want to Believe 89\u003c\/p\u003e \u003cp\u003eThe Value of Security Analysis 90\u003c\/p\u003e \u003cp\u003eBuy, Sell, or Hold? 92\u003c\/p\u003e \u003cp\u003eThe Hurdles Are Getting Higher 93\u003c\/p\u003e \u003cp\u003eAdvice from Professional Investors and Academics 94\u003c\/p\u003e \u003cp\u003eAdmissions from Industry Practitioners and Academics 96\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 8 The Prudent Investor Rule 103\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Prudent Investor Rule 106\u003c\/p\u003e \u003cp\u003eThe American Law Institute 106\u003c\/p\u003e \u003cp\u003eThe Uniform Prudent Investor Act 108\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 9 Whose Interests Do They Have at Heart? 113\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eAdvice from Professional Investors 114\u003c\/p\u003e \u003cp\u003eAdmissions from Industry Practitioners and Academics 115\u003c\/p\u003e \u003cp\u003eA Triumph of Hope over Experience 120\u003c\/p\u003e \u003cp\u003eThe Arithmetic of Active Management 121\u003c\/p\u003e \u003cp\u003eThe Math Is Always the Same 123\u003c\/p\u003e \u003cp\u003eThe Costs of Active Investing 124\u003c\/p\u003e \u003cp\u003eThe Cost of Cash 126\u003c\/p\u003e \u003cp\u003eAn Expensive Quest 127\u003c\/p\u003e \u003cp\u003eSummary 129\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 10 How to Play the Winner’s Game 133\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eIndexing Is More than the S\u0026amp;P 500 Index 135\u003c\/p\u003e \u003cp\u003eDoes Passive Investing Produce Average Returns? 140\u003c\/p\u003e \u003cp\u003eEnough 141\u003c\/p\u003e \u003cp\u003eNeeds versus Desires 144\u003c\/p\u003e \u003cp\u003ePascal’s Wager 145\u003c\/p\u003e \u003cp\u003e\u003cb\u003eConclusion 147\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Yale Endowment Fund 148\u003c\/p\u003e \u003cp\u003eThe Way to Win Is Not to Play 149\u003c\/p\u003e \u003cp\u003eThe Quest for the Holy Grail 150\u003c\/p\u003e \u003cp\u003eThe Winner’s Game 151\u003c\/p\u003e \u003cp\u003eAppendix A: Rules of Prudent Investing 153\u003c\/p\u003e \u003cp\u003eAppendix B: Doing It Yourself 159\u003c\/p\u003e \u003cp\u003eNotes 165\u003c\/p\u003e \u003cp\u003eSources of Data 176\u003c\/p\u003e \u003cp\u003eAbout the Author 177\u003c\/p\u003e \u003cp\u003eIndex 179\u003c\/p\u003e  \u003cp\u003e\u003cb\u003eLARRY E. SWEDROE\u003c\/b\u003e is a principal and the Director of Research for the Buckingham Family of Financial Services, which includes Buckingham Asset Management and BAM Advisor Services. He has also held executive-level positions at Prudential Home Mortgage, Citicorp, and CBS. Swedroe frequently speaks at financial conferences throughout the year and writes the blog \"Wise Investing\" at CBS MoneyWatch.com.   \u003c\/p\u003e\u003cp\u003eKing Arthur and his court pursued the Holy Grail, the mythical cup or dish used by Jesus at the Last Supper.The financial equivalent of the pursuit of the Holy Grail is the quest for the money managers who will deliver alpha—returns above the appropriate risk-adjusted benchmark. The quest for alpha is based on the theory that the markets are inefficient, and smart people working diligently can discover pricing errors the market makes. But there is a competing theory based on about sixty years of academic research. Its premise is that markets are highly efficient—the market price of a security is the best estimate of the right price. If markets are highly efficient, efforts to outperform are unlikely to prove productive after the expenses of the efforts. So which theory is correct?\u003c\/p\u003e \u003cp\u003eIn The Quest for Alpha, Larry Swedroe presents research, data, and advice from some legendary market gurus to show that it is extremely difficult to outperform the market. Examining the evidence from academic studies on mutual funds, pension plans, hedge funds, private equity\/venture capital, individual investors, and behavioral finance, he demonstrates that the markets are indeed highly efficient. Swedroe then explains why investors should instead focus on asset allocation, fund construction, costs, tax efficiency, and the building of a globally diversified portfolio that minimizes, if not eliminates, the taking of idiosyncratic, uncompensated risks.\u003c\/p\u003e \u003cp\u003eAnd to those who ask, \"But how do you explain Warren Buffett?\" Swedroe's answer is simple. \"I tell them if they see Warren Buffett when they look in the mirror, go ahead and seek the holy grail of alpha,\" he says. \"If they don't, give up the quest and play the winner's game.\"\u003c\/p\u003e  \u003cp\u003e\u003cb\u003eThe final word on active vs. passive investing!\u003c\/b\u003e \u003c\/p\u003e\u003cp\u003eKing Arthur and his court pursued the Holy Grail, the mythical cup or dish used by Jesus at the Last Supper. The financial equivalent of the pursuit of the Holy Grail is the quest for the money managers who will deliver alpha—returns above the appropriate risk-adjusted benchmark. The quest for alpha is based on the theory that the markets are inefficient, and smart people working diligently can discover pricing errors the market makes. But there is a competing theory based on about sixty years of academic research. Its premise is that markets are highly efficient—the market price of a security is the best estimate of the right price. If markets are highly efficient, efforts to outperform are unlikely to prove productive after the expenses of the efforts. So which theory is correct? \u003c\/p\u003e\u003cp\u003eIn \u003ci\u003eThe Quest for Alpha\u003c\/i\u003e, Larry Swedroe presents research, data, and advice from some legendary market gurus to show that it is extremely difficult to outperform the market. Examining the evidence from academic studies on mutual funds, pension plans, hedge funds, private equity\/venture capital, individual investors, and behavioral finance, he demonstrates that the markets are indeed highly efficient. Swedroe then explains why investors should instead focus on asset allocation, fund construction, costs, tax efficiency, and the building of a globally diversified portfolio that minimizes, if not eliminates, the taking of idiosyncratic, uncompensated risks. \u003c\/p\u003e\u003cp\u003eAnd to those who ask, \"But how do you explain Warren Buffett?\" Swedroe's answer is simple. \"I tell them if they see Warren Buffett when they look in the mirror, go ahead and seek the holy grail of alpha,\" he says. \"If they don't, give up the quest and play the winner's game.\"   “As I noted recently, success in investing is somewhat counterintuitive, and requires most investors to set aside their pre-conceived notions of how to build a portfolio that will allow them to reach their goals. The task is made all the harder because the vast majority of the participants in the financial services industry spend hundreds of millions of dollars annually reinforcing the myth of active management. Fortunately for investors, experts like Larry Swedroe are hard at work pointing out the fallacies of those myths, while also detailing the undeniable logic and mathematics that underpin a passive approach. \u003ci\u003eThe Quest for Alpha\u003c\/i\u003e is a wonderful addition to that effort, and investors will be well-rewarded by reading it and acting upon its wisdom.”\u003cbr\u003e — Nathan Hale, moneywatch.com, March 2011\u003c\/p\u003e","brand":"Bloomberg Press","offers":[{"title":"Default Title","offer_id":47990325510373,"sku":"NP9780470926543","price":27.95,"currency_code":"USD","in_stock":false}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/1842\/7735\/files\/9780470926543.jpg?v=1761787364","url":"https:\/\/k12savings.com\/products\/the-quest-for-alpha-isbn-9780470926543","provider":"K12savings","version":"1.0","type":"link"}