Interesting paper, I'll have to give it a full read tomorrow.
Ponderings...
The measurements were made when many, perhaps most, did not "do" index funds. The "market efficiency" of indexes depends to some degree on people who thrash trade or "actively manage" to try to make an extra buck or two. In other words, if everyone indexed, the markets might move slowly, with lower volatility, and be a bit more predictable and based more on earnings than psychology.
Question: now that the 'cats out of the bag', do more people index and will that dampen returns and/or volatility?
A lot of "ideas" that test well historically simply may not do well going forward because...well...everyone knows about them!
Are REIT, metals and emerging markets funds seeing some good returns over the last 5 years because people are doing portfolio diversification and buying at the market price or because they have solid fundamentals?