Some of you may already be aware of this, but I hadn't heard the quote until I read an article in this month's JEP:
"I should have computed the historic covariances of the asset classes and drawn an efficient frontier. Instead...I split my contributions fifty-fifty between bonds and equities" -- Harry Markowitz. Yes, the one who won a Nobel for MPT. How cool is that? Makes me feel less bad about my own ad-hoc investment strategies.
I actually couldn't find that quote in the source given in this month's JEP, but typing "I split my contributions fifty-fifty" in google brings up a bunch of sources with different extended versions of the quotation.
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4 comments:
Do you suppose a quote makes other quant traders "feel less bad" about their strategies after a month volatilites such as we have seen in the past couple months? Calculate your covariances all you want--they will change over time and especially when market volatility is greatest. MPT is theoretically bankrupt.
scathing.
I just think it's cool that the father of a rather detailed and well-traveled theory actually used the "Invest-by-Heuristics" model when dealing with his personal fortune, just like the rest of us.
I agree that heuristic or other flexible allocation strategies are superior to strict adherence to any financial model (with all the covariances you care to calculate). My guess is that Markowitz's private investments have fared far better than those of his strictest adherents.
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