Browsing: modern portfolio theory

Posts Tagged ‘ modern portfolio theory ’

Wedding ESG with Modern Portfolio Theory

Mar 29th, 2020 | Filed under: Newly Added, Socially responsible investing, ESG, The A.I. Industry, Other Topics in A.I.

Three executives at AQR Capital have proposed a new variant on modern portfolio theory, an elaboration of the classical idea of an efficient frontier. The idea, going back to Markowitz’ 1952 paper, is that there exists a set of possible portfolios such that each achieves the best possible risk-return tradeoff.Read More


Liquidity: Running for the Exits

Aug 15th, 2019 | Filed under: Newly Added, Risk management, Other Issues in Private Investments, The A.I. Industry, Risk Management Strategies & Processes, Hedge Funds, Risk Management & Operations

Liquidity vanishes when you need it most. That isn’t an especially original observation. It’s like saying that the exit doors are always jammed precisely when you need a quick exit quickly. Amin Rajan gives us a forceful statement of this point inspired by the “current travails at Woodford Asset Management.”Read More


Accommodating Ambiguity Aversion in Portfolio Modeling

May 14th, 2019 | Filed under: Performance, Analytics & Metrics, Newly Added, Risk management, Risk Metrics and Measurement, The A.I. Industry, Risk Management Strategies & Processes

By standard definition, “ambiguity aversion” is the preference for known risks over unknown risks, the known unknowns over the unknown unknowns. A recent paper discusses the portfolio-level consequences of this aversion. The paper, written by Valery Polkovnichenko and Hui (Grace) Wang, explains that for an ambiguity-neutral investor, “adding active portfolio withRead More


How Bayesians Solve the Markowitz Problem

Jan 13th, 2019 | Filed under: CAPM / Alpha Theory, Financial Economics Theory, Newly Added, Behavioral finance, The Global Economy & Currencies, Macroeconomics, Finance & Economics

Understanding of the “Markowitz problem” has changed in the 60+ years since Harry Markowitz’ publication of an article in the Journal of Finance that outlined the basics of modern portfolio theory. The problem is that portfolio theory requires an investor to estimate risk, return, and correlation from market data, meaningRead More


Jacobs, Levy, and Markowitz on Portfolios

Aug 22nd, 2017 | Filed under: CAPM / Alpha Theory, Financial Economics Theory, Newly Added, Finance & Economics

Bruce Jacobs and Kenneth Levy, the founders and Chief Investment Officers of Jacobs Levy Equity Management, have brought out a new and considerably thickened edition of their classic collection of articles on equity investment. This second edition of Equity Management contains all 15 articles from the original, and 24 ofRead More