RT Journal Article
SR Electronic
T1 Toward an Optimal Domestic Large-Cap Equity Index
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 85
OP 91
DO 10.3905/jpm.2005.599506
VO 32
IS 1
A1 Hamish Seegopaul
A1 Francis Gupta
A1 John Prestbo
YR 2005
UL https://pm-research.com/content/32/1/85.abstract
AB Choosing a benchmark for domestic large-cap equities is critical for plan sponsors because benchmarks play an important role in implementation of the portfolio management decision. As the sole purpose of active management is to generate excess returns over the benchmark, it is important that an equity benchmark representing this asset class be efficient, so that any outperformance of an active manager can be considered an outcome of the manager's skill. A more efficient benchmark for large-cap equity results in a historical average information ratio of zero for the universe of active managers. The key to generating alpha in this asset class then depends on one's ability to identify skillful managers.