Do you feel like you have a good grasp of financial markets? Think again! In this episode, we take a plunge into the world of financial markets with experts Jules van Binsbergen and Jonathan Berk. Jules is a Professor of Finance at the Wharton School of the University of Pennsylvania and Jonathan is a Professor of Finance at Stanford Graduate School of Business. They also host a popular podcast called Else Equal, which explores the science and strategy of making better financial decisions, and have written several academic papers that challenge the status quo. In our conversation, we discuss their research on the relationship between manager skill and fund performance, the best ways to measure performance, and reasons why benefits are in favour of the managers. We also explore the dogma surrounding mutual funds, the differences between active and passive management, and how to measure efficient capital markets. Listeners will also hear perspectives that challenge their understanding of capital markets and viewpoints that completely disagree with previous guests. Although we have covered this topic before in previous episodes, this conversation will fundamentally change the way you view financial markets and how to think about them. Timestamps: 0:00 Intro 4:03 Skill & Performance 1:21:01 Asset Pricing Models 1:28:15 Definition of Success Participate in our Community Discussion about this Episode: https://community.rationalreminder.ca/t/episode-220-jonathan-berk-and-jules-van-binsbergen-the-arithmetic-of-active-management-revisited-discussion-thread/19429 Links From Today’s Episode: Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder Website — https://rationalreminder.ca/ Shop Merch — https://shop.rationalreminder.ca/ Join the Community — https://community.rationalreminder.ca/ Follow us on Twitter — https://twitter.com/RationalRemind Follow us on Instagram — @rationalreminder Benjamin on Twitter — https://twitter.com/benjaminwfelix Cameron on Twitter — https://twitter.com/CameronPassmore Jonathan Berk — https://www.gsb.stanford.edu/faculty-research/faculty/jonathan-b-berk Jules van Binsbergen — https://sites.google.com/view/jules-van-binsbergen/ Else Equal: Making Better Decisions podcast— https://www.gsb.stanford.edu/business-podcasts/all-else-equal-making-better-decisions 'Mutual Fund Flows and Performance in Rational Markets' — https://www.jstor.org/stable/10.1086/424739 'Measuring skill in the mutual fund industry' — https://www.sciencedirect.com/science/article/abs/pii/S0304405X15000628 'Mutual Funds in Equilibrium' — https://www.annualreviews.org/doi/abs/10.1146/annurev-financial-110716-032454?journalCode=financial#article-denial 'Matching Capital and Labor' — https://onlinelibrary.wiley.com/doi/abs/10.1111/jofi.12542 'Assessing asset pricing models using revealed preference' — https://www.sciencedirect.com/science/article/abs/pii/S0304405X1500149X 'How Do Investors Compute the Discount Rate? They Use the CAPM' — https://www.cfainstitute.org/en/research/financial-analysts-journal/2017/how-do-investors-compute-the-discount-rate-they-use-the-capm-corrected-june-2017