It's yet to be shown that anybody has the capability to market time successfully, and it's certainly yet to be shown that billions of dollars worth of pension funds could be successfully market-timed.
Denver, CO (Vocus) September 18, 2009
The just-released Summer 2009 issue of Investment Management Consultants Association's Journal of Investment Consulting features an interview with Harry Markowitz, Ph.D., the "Father of Modern Portfolio Theory."
In "Ideas and Innovation across Multiple Disciplines: A Discussion with Nobel Laureate Harry M. Markowitz, Ph.D.," Dr. Markowitz talks about the current state of finance, the history of financial market and investment theory, and the continued importance of diversification. Dr. Markowitz said, "It's yet to be shown that anybody has the capability to market time successfully, and it's certainly yet to be shown that billions of dollars worth of pension funds could be successfully market-timed." Advisors should realize that 2008 was not unique and they should educate clients "to establish a mix of stocks and bonds that they can live with," he said.
Dr. Markowitz discussed two areas in which he's working to provide value for the future: 1) The problem of illiquidity and changing probability distributions. 2) The fact that "our models--our hypotheses about the world--tend to be very simplistic. Economists' models tend to consist of a few equations and a few unknowns, and that's supposed to model the world. I think there should be more use of asynchronous, discrete event simulation models of financial markets." These areas have applications in government policies as well as investment policies and trading strategies, he said.
The interview with Dr. Markowitz is the eighth installment of the Journal of Investment Consulting's Masters Series, which presents topical discussions with leading experts and visionaries in finance, economics, and investments. Previous interviews in the series featured Eugene F. Fama, Ph.D., Barr Rosenberg, Ph.D., John Bogle, and others.
Other papers in the Summer 2009 issue of IMCA's academic, peer-reviewed journal include the following: "Approaching the Tarmac: Examining Target Date and Balanced Funds" by Craig L. Israelsen, Ph.D.; "Location and Trading Performance in Electronic Markets" by Ryan Garvey, Ph.D., and Fei Wu, Ph.D.; "A New Approach to Tail Risk" by Ana Cascon, Ph.D., and William F. Shadwick, Ph.D.; "The Yield Disparity in 401(k) Plans: Does Higher Annual Pay Mean Higher Rates of Return on Retirement Accounts?" by Matthew Morey, Ph.D.; and "A Framework for Portfolio Decumulation" by Richard K. Fullmer, CFA®.
To learn more about the Journal of Investment Consulting or to purchase reprints of these articles, visit http://www.IMCA.org/main/do/The_Journal .
Note to editors and reporters: if you are interested in reading the full interview with Dr. Markowitz, or to receive a complimentary copy of the Journal of Investment Consulting, please e-mail Beau Ballinger at bballinger(at)imca(dot)org.
Based in Denver, CO, IMCA was established in 1985 to deliver the premier investment consulting and wealth management credentials and world-class educational offerings--membership, conferences, research, and publications. The cornerstone of IMCA is the Certified Investment Management Analyst℠ or CIMA® certification, the only advanced certification designed specifically for investment consultants. IMCA also delivers the advanced certification for wealth management professionals working with high-net-worth clients, the Certified Private Wealth Advisor℠ or CPWA℠ certification.
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