The costs of alpha

Kenneth French, of Fama-French fame, has drawn attention for a working paper that calculated the cost of trying to generate alpha. The New York Times relates how the Dartmouth finance professor simply added up all the costs of investing--fees, transaction costs and other things--and then deducted the amount they would have paid if they were in indexes. The results show that the costs of investing have been on the rise, even at a time when trading costs collectively were thought to be in decline. In 2007, costs may have hit $100 billion for the first time. The point, according to the Times, is that most people are better off indexing.  

For more:
- here's the column

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