Passive investing costs less, but produces a higher than average return after costs in the long term. Here's how it works.
Nobel Prize-winning economist William Sharpe describes his Capital Asset Pricing Model, which has become one of the cornerstones of the mathematical argument in favour of passive investing. Also includes an explanation of the Efficient Market Hypothesis from Ken French, who developed the theory with Eugene Fama.
Additional comment from Dan Goldie (The Investment Answer), Weston Wellington, Laurence Gosling (Investment Week), Ben Johnson (Morningstar), Tim Hale and Prof. Stephen Thomas.