since Benjamin Graham and David Dodd published their classic text on security analysis in 1934. For one, the types of stocks available for investment have shifted dramatically, from companies with mostly physical assets (such as railroads and utilities) to companies with mostly intangible assets (such as technology stocks and pharmaceuticals). Moreover, Modern Portfolio Theory and the Capital Asset Pricing Model, in conjunction with new data sources and powerful computers, have revolutionized the way investors select stocks and create portfolios. Consequently, what was once mostly an art is increasingly becoming a science: Loose rules of thumb are being replaced by rigorous research and complex implementation. Of course, these new advances, while greatly expanding the frontiers of finance, have not necessarily made it any easier for portfolio managers to beat the market. In fact, the increasing sophistication of the average investor has probably made it more difficult to find-and exploit-pricing errors.1 There are no sure bets, and mispricings, when they occur, are rarely both large and long lasting. Successful managers must therefore constantly work to improve their existing strategies and to develop new ones. Understanding fully the equity management process is essential to accomplishing this challenging task. These new advances, unfortunately, have also allowed some market participants to stray from a sound investment approach. It is now easier than ever for portfolio managers to use biased, unfamiliar, or incorrect data in a flawed strategy, one developed from untested conjecture or haphazard trial and error. Investors, too, must be careful not to let the abundance of data and high-tech techniques distract them when allocating assets and selecting managers. In particular, investors should not allow popular but narrow rankings of short-term performance to obscure important differences in portfolio managers' style exposures or investment processes. To avoid these pitfalls, it helps to have a solid grasp of the constantly advancing science of equity investing. Studies show that the majority of professional money managers have been unable to beat the market. For example, see Malkiel (1995).