The quote below from John Bogle (former Chairman of Vanguard Investments) can also be found on page 176 of the 10th edition of the BHB text. In the quote, Mr. Bogle emphasizes the importance of asset allocation and in doing so references the results of a study by Brinson, Hood & Beebower (e.g. the "94%" reference is taken from the study).The most fundamental decision of investing is the allocation of your assets: How much should you own in stock? How much in bonds? How much in cash?... That decision [has been shown to account] for an astonishing 94% of the differences in total returns achieved by institutionally managed pension funds... There is no reason to believe that the same relationship does not hold true for individual investors.John Bogle

However, there is an error in Mr. Bogle's quote.

Your assignment is to identify and explain Mr. Bogle's error. You will need to read through the research articles by Brinson, Hood & Beebower and by Ibbotson & Kaplan which can be found in Canvas under Modules. You will also need to understand and interpret the statistical measure R-Squared.

Please do NOT summarize the articles as part of the assignment. Your response should CLEARLY identify Mr. Bogle's error and explain why it is incorrect. Hint: Pay special attention to the first page of the Ibbotson & Kaplan article. The error has nothing to do with the "94%" number (or 92% - depending on which study you read). Mr. Bogle is not the only investment professional to make this error as explained in the Ibbotson/Kaplan article.