Your comment on the declaration of bankruptcy of the consultants for their SAA advice is spot on. I have worked with so many of the largest consultants and they are all very similar indeed and lack creativity and depth.
“The market always prices risk in the price”. So how come stocks can be priced at £x, and then £x minus 10-20% within weeks or even days? Answer - sentiment, emotion and psychology, none of which are factored into the CAPM.
sentiment, emotion and psychology, none of which are factored into the CAPM. But also derivatives strategies which affect the market price of the underlying in the short to medium run. IMHO
When I was younger I thought finance thought leaders were so intelligent. And while there is intelligence there what I’ve realized as I’ve studied markets more and observed these finance thought leaders is that they/we are basically smart fellows who weren’t smart enough (in most cases, not yours!) to get into engineering or medicine!
Don't tell anyone, but I agree. I think the people in engineering or sciences (incl. medicine) are on average smarter than the people in finance. But if you quote me, I will deny I ever said that :-)
Never found CAPM convincing. Always an ex-post rationalisation/simplification/intellectual whimsy. Rather like economics. Personally I treat markets as a rigged casino and place my bets accordingly
Your comment on the declaration of bankruptcy of the consultants for their SAA advice is spot on. I have worked with so many of the largest consultants and they are all very similar indeed and lack creativity and depth.
Trust me, I have had my fair share of interactions with consultants. In my view they on average destroy value for pension funds etc.
“The market always prices risk in the price”. So how come stocks can be priced at £x, and then £x minus 10-20% within weeks or even days? Answer - sentiment, emotion and psychology, none of which are factored into the CAPM.
sentiment, emotion and psychology, none of which are factored into the CAPM. But also derivatives strategies which affect the market price of the underlying in the short to medium run. IMHO
When I was younger I thought finance thought leaders were so intelligent. And while there is intelligence there what I’ve realized as I’ve studied markets more and observed these finance thought leaders is that they/we are basically smart fellows who weren’t smart enough (in most cases, not yours!) to get into engineering or medicine!
Don't tell anyone, but I agree. I think the people in engineering or sciences (incl. medicine) are on average smarter than the people in finance. But if you quote me, I will deny I ever said that :-)
More in sciences, less in engineering, few in medicine, rare in finance.
Imho
Never found CAPM convincing. Always an ex-post rationalisation/simplification/intellectual whimsy. Rather like economics. Personally I treat markets as a rigged casino and place my bets accordingly