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.
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.