In Pursuit of the Perfect Portfolio: Myron S. Scholes

Please do not quote. To accompany the forthcoming book, In Pursuit of the Perfect Portfolio by Steve Foerster (Ivey Business School at Western University) and Andrew W. Lo (MIT).

[glorydays]

Undoubtedly one of the best finance interviews of all time. Those who cannot recognize the value of Scholes' insights have never truly understood the nature of markets and/or portfolio management. His findings are mathematically sound, though his proposed application of the knowledge is not. The option market does not reflect future knowledge, but merely today's perception of the future in the form of a best estimate. In mostly efficient markets, building a strategy upon known information is a fool's game as it is already priced into markets. Instead, investors should diversify across any sources of uncorrelated systematic risk and thereby reduce their expected volatility drag/convexity costs.

[everetteborr]

In this interview, Scholes tells us that a 60/40 allocation and target funds are not the way to go, but he never discusses what he recommends for the individual investor to do.

He can only discuss risk management concepts that only huge institutions can do, but are apparently not doing.

[rpnabar]

Scholes says what happens in the next 3 months is most important. Bogle and buffet say focus on the long horizons. How do we reconcile this?

[charleswesesky]

He's so well spoken and intelligent.

[udayan]

No questions about the collapse of Long Term Capital Management?!

[tom]

Relying on the market for information is crazy.

[impressivenow]

Most interesting interview, I'm only at 8min

[Chessmapling]

Why is risk not constant in an index fund? The risk of each company does shift, but on an aggregate scale I doubt it changes very much. Would be interesting to see some data on this though

[TheJojoaruba]

Buy low and sell high…
Where is my Nobel Prize in Economics?

[dansubadukuruguay]

Hablando del portfolio perfecto cuando casi arruinas la economía mundial con tus experimentos, descarado. Deberías estar en la cárcel.