Comments on: Modern Portfolio Theory: Fact or Fiction?

By: DIY Investor

DIY Investor — Tue, 09 Nov 2010 13:10:22 +0000

Its not about rationality or irrationality its about many people wanting the same thing. Economists analyze shoppers and watch people try to improve their position in line. Guess what? On average they don’t because there are other shoppers trying to do the same exact thing.
I know a lot of people say the market was irrational in early 2009 after its precipitous drop adding to the -37% in 2008. Was it really? How much are stocks worth if people start closing their money market funds? It came very close to that. What if the commercial paper market freezes? It came close to that.
It’s easy to look back after the market is up 75% and say people were irrational.
DIY Investor´s latest post ..Is Inflation Over Emphasized

By: What Happens When the Glass Is Too Big? | Balance Junkie

What Happens When the Glass Is Too Big? | Balance Junkie — Mon, 08 Nov 2010 10:47:40 +0000

[...] of rational expectations “the greatest-ever failure of economic theory.” Sorry to Modern Portfolio Theory fans out there. If you haven’t already read it, this letter in its entirety really is worth [...]

By: Best Personal Financial Planning Ideas | Personal Investment Management and Financial Planning Blog Directory

Fri, 28 May 2010 02:41:13 +0000

[...] Cents presents Modern Portfolio Theory: Fact or Fiction? posted at Balance Junkie, saying, “This article looks at whether or not Modern Portfolio [...]

By: Passive Investing and the Ostrich Effect | Balance Junkie

Passive Investing and the Ostrich Effect | Balance Junkie — Thu, 27 May 2010 09:48:09 +0000

[...] passive investors are adherents to the principles of Modern Portfolio Theory, and by association, the Efficient Market Hypothesis. I’m not so cracked on either myself, [...]

By: Financial Ramblings

Financial Ramblings — Sun, 23 May 2010 13:46:32 +0000

[...] Modern Portfolio Theory @ Balance Junkie [...]

By: 2 Cents

2 Cents — Sat, 22 May 2010 16:35:12 +0000

Hmmm. Modern Karma Theory. I like that. It’s definitely something for investors to look out for!

By: Funny about Money

Funny about Money — Sat, 22 May 2010 14:37:45 +0000

I’m pretty much in your part of the ballpark on this issue, too. The idea that investors are rational is on its face irrational. Your reference to the Nikkei, too, is telling. In my experience, a peculiar phenomenon takes place: you can pretty much be sure that no matter how much your holdings have earned over time, the market will drop precipitously just as you arrive at retirement. Guaranteed.

We could call that the Modern Karma Theory.
.-= Funny about Money´s last blog ..Moment of Fame =-.

By: Today’s Markets: Not Business as Usual | Balance Junkie

Today’s Markets: Not Business as Usual | Balance Junkie — Sat, 22 May 2010 14:29:01 +0000

[...] 3. Transparency: While financial innovation has lead to more complexity in the market, that complexity has also lead to less transparency. There are forces acting on the markets each day that most investors aren’t aware of. They can and do affect the value of your savings. This became abundantly clear during the flash crash on May 6th. I’m going to write about this in greater detail later this week as well as the investing implications for adherents to Modern Portfolio Theory. [...]

By: 2 Cents

2 Cents — Fri, 21 May 2010 16:08:08 +0000

Yeah. That’s one area where I agree with MPT advocates: it’s really hard to take advantage of inefficiencies. But like you, I don’t think that should keep us from trying!

I don’t think that trying to time the market is any more of a gamble than staying fully invested. You just need to have a system that works. In both cases, you are taking a position. Which is right? It depends on the day you ask the question.

Thanks for stopping by Monevator!

By: Monevator

Monevator — Fri, 21 May 2010 15:55:04 +0000

It’s one thing to think the market isn’t entirely efficient, but it’s another thing to profit from those inefficiencies in the long-term.

Doesn’t stop me trying, mind!