e-book

Investment theory and risk management

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A successful fund manager and former academic once told me that business
school research is focused too much on topics that get professors
published and promoted and too little on explaining how markets actually
work. This was not an entirely facetious remark. He was referring to what
he perceived to be a fundamental disconnect between the objectives of
mainstream business school curricula and those of investment professionals.
As both an academic and an investment professional, I not only echo that
sentiment but I also see the gap widening. This book attempts to bridge
that gap.

My experience over the past thirty years confirms a continuing trend in
core business school curriculums away from rigorous analytics. It should
come as no surprise, therefore, to see practitioners discount the value of
strong analytic skills in their decision-making processes. Indeed, my conversations
with practitioners reveal a heavy bias to their instincts as investment
managers and a tone that challenges me to prove to them that there is somehow
a cost associated with not understanding the details of various concepts
such as mean variance optimization, the decomposition of risk,
derivatives, and so forth. They simply point to their portfolio outperformance
relative to their benchmarks as evidence suggesting that these skills are
at best superfluous. I might note here as well that most of the professionals
around today learned to manage assets during the long-running bull market
that began in the early 1980s—a period of time when it was arguably difficult
not to have made money. I don’t think it was a coincidence that business
schools began to deemphasize scientific rigor at about the same time.

The past 30 years have also coincided with a second ‘‘industrial revolution’’
made possible in part by unprecedented gains in computer processing
power. Improvements in information technology followed which revolutionized
both the quantity and quality of information available which, in
turn, gave rise to an array of new securities and trading innovations, strategies,
tactics, and portfolio design and ushered in a new era of market globalization.
It is interesting that the skills that complemented the new
technology (mathematics, statistics, and programming for instance) were
being deemphasized at about the time they should have been leveraged
upon. Anyone with a Bloomberg terminal and a spreadsheet was thought to
have the requisite skill set to handle any empirical questions that may have
arisen while those individuals who actually understood the math were
thought to possess purely gratuitous skill sets. This mindset should have
changed as the credit crisis unfolded but, ironically, a large part of the burden
of blame for the crisis was heaped on the technology itself and not the
fact that the users of that technology were grossly underprepared to wield it
responsibly.

The simple facts are that technology and the credit crisis together have
accelerated the pace of globalization. In turn, the global economic environment
will continue to challenge the status quo while markets will become
even more competitive, more volatile, and inherently more risky. These developments
would seem to suggest that both business school curricula and
investment managers embrace opportunities to attain skills that will make
them more effective competitors in this global environment.

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Ketersediaan

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Informasi Detail

Judul Seri

Wiley finance series

No. Panggil

-

Penerbit

New York : John Wiley & Sons, Inc.., 2012

Deskripsi Fisik

HG4529.P478 - 332.601—dc23

Bahasa

English

ISBN/ISSN

978-1-118-26304-4

Klasifikasi

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Tipe Isi

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Tipe Media

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Tipe Pembawa

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Edisi

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Subjek

KEUANGAN

Info Detail Spesifik

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Pernyataan Tanggungjawab

agus

Versi lain/terkait

Lampiran Berkas

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