Finance rests upon several critical assumptions that have logical holes. Among the assumptions are: Brownian motion and normally distributed outcomes. Here is a discussion of some of the effects caused by these assumptions.
Financial theorists, policymakers, and practitioners created the financial crisis with “bad models, bad policies, bad incentives, and bad behavior,” said James Montier of GMO UK Ltd.
There is no such thing as a risk-free rate of return, just as there is no such thing as our world without action. Yet, the concept of a bedrock expected rate of return is a good one in need of a better description that is more reflective of reality.
A powerful alternative to traditional credit ratings is the scenario-planning approach developed by Kamal Mustafa, CEO of Invictus Consulting Group.
The roots of value investing can be traced back to the 1934 publication of Benjamin Graham and David Dodd’s classic, Security Analysis. Graham later disseminated his views to the general public in the highly regarded book The Intelligent Investor. The influence of Graham’s methodology is indisputable. His disciples represent a virtual who’s who of value investors, including Warren Buffett, Bill Ruane, and Walter Schloss. As a measure of his enduring impact on the field, a search of “Benjamin Graham” on Amazon.com yields more than 900 results concerning Graham’s writings and works about his investment philosophy. Given the success of the master and his students, it is no wonder that Graham remains an investor of immense interest to practitioners.
Carl R. Bacon, CIPM, a performance measurement specialist, discusses the evolution of performance attribution, the latest developments in performance measurement, and the issue of ex post risk.
Emanuel Derman spent two decades at Goldman Sachs, making valuable contributions to financial modeling. Before that, as recounted in My Life as a Quant (John Wiley & Sons, 2004), he was a physicist. Today, Derman is the head of risk management at Prisma Capital Partners and directs Columbia University’s financial engineering program. He also devotes energy to combating the belief that security markets can be analyzed with the same mathematical precision as heavenly bodies and subatomic particles.
The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.