The Grinold “Law of Active Management” is one of the most widely referenced and misused formulas in investment theory and practice.

The formula’s popularity is due to suggesting suggestions of techniques for improving MV optimized portfolio performance that any manager can implement. But there are no free lunches in asset management: GK’s rules generally lead to mismanagement. Indeed effective strategies are often the opposite of those prescribed by GK. In addition, published extensions of the formula have also given rise to equally ineffective proposals.