Practical Applications of On the Optimal Mix of Active and Passive Investments

Determining exactly the dollar amount to allocate to active investments in a client’s portfolio has long been a problem faced by financial advisors and portfolio managers. Stephen Buser , Professor Emeritus at The Ohio State University , has come up with a solution. He proposes a modified version of the Treynor and Black appraisal ratio to identify the exact dollar amount of a portfolio to be allocated to active investments. In an interview with Institutional Investor Journals , Buser discusses incorporating theta to develop the adjusted measure of the appraisal ratio and outlines how the modified ratio provides opportunities for financial advisors, metrics providers and institutional managers.