Modern Portfolio Theory (MPT)
Investing is never done in the abstract. Investing is — and always has been — goals-based.
The capital asset pricing model (CAPM) is a marvel of economic scholarship. The problem is that it doesn’t always work in practice. So, we fixed it.
How important is asset allocation? Roger G. Ibbotson shared his insights.
Thomas Pistorius challenges much of mainstream investment theory that uses mathematical statistics to predict returns.
Getting Back to Business challenges the premises and prescriptions of modern portfolio theory (MPT) and offers an alternative investment approach.
A defense of modern portfolio theory (MPT) by Nathan Erickson, CFA, CAIA, and Richard Stott; Nicolas Rabener's analysis of the value of factor investing; and an examination of the non-retirement phenomenon by Barbara Stewart, CFA, were among the leading posts from last month.
C. Thomas Howard and Jason Voss, CFA, have called for the demise of modern portfolio theory (MPT) and the capital asset pricing model (CAPM). They say “financial markets should be viewed and analyzed using a behavioral lens.” Nathan Erickson, CFA, CAIA, and Richard Stott have a different opinion.
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.
Despite numerous studies attempting to link volatility to changing fundamentals, research shows that investor emotions are the root cause of the vast majority of these price changes, according to C. Thomas Howard.
As modern portfolio theory fades in reputation from intense pressure from behavioral finance, many researchers are seeking to fill the void with behavioral finance applications. Behavioral portfolio management is one such model.