What's wrong with efficient portfolios?

Article Abstract:

Modern portfolio management aims to boost returns and cut risks, but investors tend not to follow modern portfolio theory. This is partly due to a herd instinct among fund managers, but there are also problems with modern portfolio management. Risk levels are measured by variances, but these can change over time, as can covariances. Stock may become more or less volatile, and all may fall together though this correlation may not have been previously observed. Portfolio analysis demands a great deal of information on some areas, and provides little information on levels of risk that investors should take on, and well as little help in assessing one's human capital.

Risk management

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The dangers of risk

Article Abstract:

Setting up a low-risk portfolio of equities involves more than simply buying low-risk stocks. The extent to which the selected stocks move together is also important, and risk is reduced if one stock drops when the other is rising. Relationships between stocks change over time, so it is not easy to predict the future. Investors should also consider the industry where they work when selecting stocks for investment purposes. A portfolio with petroleum stocks involves more of a risk for someone working in the petroleum industry. A portfolio with few industrial stocks is a low-rick choice for an investor working in manufacturing industry.

Study and teaching, Stock price forecasting

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A number puzzle

Article Abstract:

Investors who are averse to risk may wish to calculate the extent to which they should invest in stocks. There are risks related to the stock market as a whole, and to particular stocks, and holding a number of equities to diversify cannot eliminate risks related to the stock market in general. Portfolios may involve less risk with only a few stocks if they are selected with covariance in mind .

Investment analysis, Securities analysis

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