Modern Portfolio Theory

“There's a whole riff I can go on about how that completely is a misspecified measure of risk, even in public stuff, but especially in private stuff, not only with stale prices, but like, when I think about the startups that I invest in, not only do we have, li…”

“You think about it, you go and say, okay, we're going to use the last 25 years of returns and correlations, and we're going to put that into a machine, and we're going to pretend that the next 10 years will look like the last 10 years. And then the second thin…”

“Modern portfolio theory drastically underestimates risk because it's a normal distribution. In reality, we know that that is not a true thing.”

“All of the skills that are being taught are based on modern portfolio theory, which all of those, nearly all of those equations are in an APT framework or a linear regression framework, and even traditional optimization methods used for portfolio construction.…”

“Even Markowitz doesn't invest as per Markowitz, and nobody really does mean variance optimization. Otherwise, you put all your money in emerging markets.”

“And so weirdly, we don't have great tools in the investment industry to think about the shape of recoveries. And so we have a lot of work through MPT on drawdowns, on value at risk, We do a lot of work on volatility and variance, but we don't think as much abo…”