Is There A Better Way To Build “Optimal” Portfolios?

The suggestion that investment portfolios can be quantitatively optimized became controversial almost as soon as Harry Markowitz launched the modern age of portfolio design in 1952, courtesy of his famous “Portfolio Selection” paper. Not because anyone disputes the goal of engineering a portfolio that maximizes return for a given level Continue Reading

Do You Know What Macro Factors Are Driving Your Portfolios?

You may not be actively targeting macro factors in your portfolios, but it’s impossible to sidestep these elephants in the room.  Intended or not, we’re all running macro-factor portfolios to some extent. BlackRock recently analyzed nearly 10,000 portfolios managed by financial advisors using a macroeconomic lens and found “large common Continue Reading

Pulling Your Risk Estimates Up By Their Bootstrapped Simulations

London Business School’s Elroy Dimson, an emeritus finance professor, memorably defined risk as the possibility that more things can happen than will happen. Picking up on this description, the late, great institutional investment adviser Peter Bernstein once explained that Dimson’s view of risk points investors on a particular analytical path. Continue Reading