Question

In the mid-to - late 1990's, the performance of the pros was unusually poor-on the order of 90 percent of all equity mutual funds underperformed a passively managed index fund. How does this fact bear on the issue of market efficiency?

Answer 1

Passively managed index fund performs better than the 90% of all equity mutual funds ,it seems that market is efficient.One of the main reason is with the increased level of information in the internet lends strength to this concludes.Further during this period the stock having large capitalisation were top performers of the market.Value weighted indexes generally comprised of such stocks which makes it very difficult to beat during such time.So we can say that record complied by the pros is just a matter of benchmark error.