Today I came across the good example of a data visualization that compactly expresses an idea in financial economics (and econometrics, since this is all about measurement). Of course, there are a number of obvious important caveats to this depiction:
- These results will depend heavily on the choice of subsample, and the past 10 years happen to be relatively good for passive strategies. This isn't true in all 10 year periods (e.g. ending in November 2008).
- Hedge funds may not achieve the same average level of growth, but they may offer diversification, reduced risk or exposure to exotic \(\beta\).
- Warren Buffet is only one manager.