IFA.tv - #1. Nobel Laureate Harry Markowitz & Mark Hebner Talk Smart Investing: Part 1

[DavidAKZ]

@JakeMansonNYC “The attraction of the CAPM is that it offers powerful and intuitively pleasing predictions about how to measure risk and the relation between expected return and risk. Unfortunately, the empirical record of the model is poor—poor enough to invalidate the way it is used in applications.”

Fama, Eugene F., and Kenneth R. French 2004. "The Capital Asset Pricing Model: Theory and Evidence." Journal of Economic Perspectives, 18(3): 25–46.

[MrThomas170]

Very helpful--no hype.

[MrThomas170]

Brilliant!

[TheatreCritic]

seems a pretty simple picture: risk is computed from the volatility of individual instruments and their correlation. presumably volatility and risks are assessed based on historical trends; an unavoidable ad hoc assumption, which is the weak link of the theory.

[DavidAKZ]

According to Nicholas Nassim Taleb , If you believe this historical thesis, what happened starting in Oct 07 was a one in 3000 year event. That's not supposed to give amy comfort.See 'The Black Swan'

[siddharthshetye]

@DavidAKZ : 1 in 3000 years?!? Err ... when do you think the great depression was?? If folks didn't use only last 20-30 years' historical data for computing returns, variances and covariance you'll see that 2008/2009 isn't so "astounding". But people have limited memory and then fault whatever they see on first sight. FYI, I'm Harry's student.

[DavidAKZ]

@siddharthshetye I think the point is , statistical averaging properties of the -e.g -Gaussian Copula model mask the true variation of market movements. Like Black Scholes, copula assumes the variable under review is 'piecewise continuous' - rather like the trajectory of a rocket being predictable based on past knowledge- Taleb's point is -in financial markets- humans fool themselves the models have validity . How do you account for what happened to the DOW last Thursday ~ 2.30 pm EST ?

[anon69]

@siddharthshetye 'According to the kinds of assumption that were made by large pension funds and others, the chance of the markets around the world going down 50% in 16 months' time was something like 1 in 3000' -- Willam Sharpe in 2009 Oct. See the video 'There Are No Shortcuts in Investing' at 1h31m

[kartabella]

superb. no-hype silent wisdom. not so many viewers though. no crowds. funny, and scary, how the crowrds behave.

[IndexFundsAdvisors]

Glad you enjoyed it. mark

[yotoyresponser]

@kartabella actually superb!!!

[sillewater]

Great videos, your principle matches much of my research