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Investment Strategies & Trends

Detecting True Alpha in Highly Competitive Markets

Are markets really efficient, eliminating any opportunity to earn excess return, or can skilled investment managers capture risk-adjusted excess return (alpha)? If so, how can you identify these managers?

The efficient markets hypothesis says that financial markets incorporate all available information in real time to price securities competitively, eliminating opportunities to earn excess return. The Nobel Committee split its 2013 prize for Economic Sciences between proponents of both sides of the market efficiency debate.1 For investment practitioners, the real question is whether there are skilled investment managers who can capture risk-adjusted excess return (alpha) net-of-fees, and how to identify them.

Peter Mladina

Director of Portfolio Research, Wealth Management
Peter is responsible for the application of leading research to the wealth management investment process.