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Cap-weighted, Equal-weighted, and Fundementally-weighted Indices and the Implications for Active and Passive Management Strategies

January 15, 2008

We set forth here the argument that there is no need for an investor to put all his eggs in either an active or a passive basket. Rather, there is a third possibility — namely that there is a time for active management and a time for passive management. So our conclusion is that some combination of active and passive management is in fact superior to either a purely passive or purely active strategy.

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