modern portfolio theory
The following post summarizes some key ideas from a recent edition of the CFA Institute podcast The Sustainability Story. Matt Orsagh, CFA, CIPM, senior director of capital markets policy at CFA Institute, spoke with former hedge… READ MORE ›
C. Thomas Howard, an opponent of the efficient markets hypothesis, advocates for a radical departure from the idea of diversification at the core of a healthy portfolio.
Although a fundamentally important financial concept, modern or mean-variance portfolio theory (MPT) has been of little practical value to retail investors in their asset allocation. Hansi Mehrotra, CFA, believes it’s time to develop a more practical risk-management measure.
GMO's Tina Vandersteel, CFA, believes emerging market debt is attractively priced, particularly local currency debt at current relative levels. Vandersteel believes opportunities to outperform are real, especially from a bottom-up perspective, despite challenges created by declining liquidity.
Investors want what Meir Statman calls “utilitarian benefits.” We know that a diversified, low-cost portfolio is theoretically best, but we'd rather have the amusement and bragging rights of expensive, risky investments like hedge funds and specialized equity managers.
Although the author’s argument heralding the demise of modern portfolio theory (MPT) seems weak, he offers a compelling argument for active management. Using exchange-traded funds (ETFs) and asset rotation, he demonstrates how to achieve a return superior to that of a passively managed fund that relies on MPT and index funds. Asset Rotation may well be a harbinger of an “investment renaissance” and the end of passive management.
Alarm bells have been ringing over the summer about remarkably low levels of volatility — a key input in many common investment models — across global markets.
An important new monograph from the CFA Institute Research Foundation explores a fundamental question in the wake of the global financial crisis: Has finance theory failed investors?
On my recent one-day visit to San Francisco, I chatted briefly with a flight attendant who wanted to know whether any of the papers I was discarding would make her rich if she read them. I suggested that she should… READ MORE ›
After examining his own and others' current thinking, A. Michael Lipper, CFA, believes our low level of activity in the market could indicate that we have become petrified.