The quote below from John Bogle (former Chairman of Vanguard Investments) can also be found on page 176 in the BHB text. He emphasizes the importance of asset allocation and references the results (e.g. "94%") of a study by Brinson, Hood & Beebower.

"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 reserves? . . .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 also hold true for individual investors."

John Bogle

Mr. Bogle emphasizes the importance of asset allocation and indirectly cites the results of the Brinson study as proof.

However, there is an error in Mr. Bogle's quote. Your assignment is to identify and explain Bogle's error. You will need to read through the papers by Brinson, Hood & Beebower and by Ibbotson & Kaplan, which can be found here: https://indexacapital.com/bundles/unaiadvisor/docs/papers/1986-Brinson-Determinants-of-Portfolio-Performance-I.pdf and http://www.mangustarisk.com/doc/pdf/Does_Asset_Allocation_Explain_40_90_100_Performance.pdf

Hint: Bogle was not the only investment professional to make this error as explained in the Ibbotson/Kaplan paper.