The Active Equity Renaissance: New Frontiers of Risk

Posted by Jason Apollo Voss on Apr 20, 2017 in Active Equity Renaissance, Best of the Blog, Blog | 0 comments One modern portfolio theory (MPT) pillar that is unquestionably broken is the use of volatility, specifically standard deviation, as a measure of risk. This initial error in MPT’s development is a major contributor to active investment management underperformance. Volatility Is Not Risk The concept of volatility as risk rests on a critical assumption that is overlooked by most of the...
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The Active Equity Renaissance: The Rise and Fall of MPT

Posted by Jason Apollo Voss on Apr 5, 2017 in Active Equity Renaissance, Best of the Blog, Blog | 0 comments In the early 18th century, Daniel Bernoulli proposed that individuals maximize expected utility when they make decisions under uncertainty. This reasoning launched the rationality model of human behavior that underpins many of today’s theories in economics and finance, including modern portfolio theory (MPT). The mathematical models that sprang from these theories provide a veneer of orderliness...
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Where Markets Fail: Markets Assume Fungibility

Posted by Jason Apollo Voss on Mar 27, 2017 in Blog, Where Markets Fail | 0 comments Have you ever lent a postage stamp to someone who rather than paying you back with an actual postage stamp, gave you the nominal amount of the stamp, say US 40¢, instead? This is aggravating because while the transaction is fungible due to the presumed exchangeability of currency, it is not an equal transaction. Why? Because acquiring a postage stamp requires much more than just 40¢. It also...
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The Active Equity Renaissance: Understanding the Cult of Emotion

Posted by Jason Apollo Voss on Mar 22, 2017 in Active Equity Renaissance, Best of the Blog, Blog | 0 comments “I know you are afraid and you should be afraid. I will invest you in products that will not stir up your fears.” This sentiment is applied over and over again in the investment industry in one form or another. It is the mantra of what my co-author Jason Voss, CFA, and I call the “Cult of Emotion.” The Cult is so pervasive, investment professionals are hardly aware how it affects virtually...
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The Active Equity Renaissance: Rejecting a Broken 1970s Model

Posted by Jason Apollo Voss on Mar 14, 2017 in Active Equity Renaissance, Best of the Blog, Blog | 0 comments The average active equity mutual fund underperforms its benchmark. This statement sparks little controversy and can be applied to active equity hedge funds as well. The story gets worse when the results are AUM-weighted. Collectively, active equity delivers no value to its investors and, in fact, extracts value from them. In our highly competitive markets, what industry can survive if it fails...
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Meditation Tips for Investment Professionals: Open-Monitoring Meditation

Posted by Jason Apollo Voss on Mar 1, 2017 in Best of the Blog, Blog | 0 comments Meditation provides investors with many benefits. Below are meditation tips from the newly released Meditation Guide for Investment Professionals, the full version of which is available online for CFA Institute members. The initial installment of this series offered general tips to help with almost any meditation practice. The focus in this edition is open-monitoring meditation. Why? Because the...
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