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Active trading rarely beats the market from "summary" of A Random Walk Down Wall Street by Burton Gordon Malkiel
The idea that active trading rarely beats the market is a crucial concept for investors to understand. It challenges the common belief that by constantly buying and selling securities, one can outperform the market. However, research has consistently shown that this is not the case. The efficient market hypothesis suggests that information is quickly and accurately reflected in stock prices, making it difficult for investors to consistently outperform the market through active trading. This means that even professional money managers, who spend countless hours analyzing stocks, struggle to consistently beat the market over the long term. One reason for this is that active trading comes with high costs, such as commissions, bid-ask spreads, and taxes. These costs can eat into returns and make it even more challenging to outperform the market. Additionally, the ...
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