TY - JOUR T1 - Five Myths of Active Portfolio Management JF - The Journal of Portfolio Management SP - 27 LP - 31 DO - 10.3905/jpm.2005.500350 VL - 31 IS - 3 AU - Jonathan B. Berk Y1 - 2005/04/30 UR - https://pm-research.com/content/31/3/27.abstract N2 - Five myths are debunked here. It is not true that: the return investors earn in an actively managed fund measures the skill level of the manager; the average active manager is not skilled and therefore does not add value; if managers are skilled their returns should persist—they should be able to consistently beat the market; in light of evidence that there is little or no persistence in actively managed funds' returns, investors who pick funds on the basis of past returns are not behaving rationally; and finally, because most active managers' compensation does not depend on the return they generate, their compensation is not performance–based. ER -