Finance’s Wrong Turns
Richard Michaud, PhD, CEO
New Frontier Advisors, LLC
At the June 11th all-day seminar in Boston, held at the Boston College Club and co-sponsored by the CFA Society Boston, I will announce the results of my research on “Finance’s Wrong Turns” in theory and practice with proposals for resolutions.
There is a foundational crisis in modern finance theory and practice. There is little credible evidence that active investment strategies provide superior risk-adjusted, cost-adjusted return over investment relevant horizons. Investors are increasingly voting with their feet and adopting minimal-cost no-information index or rule-based factor funds. Why is professional investment management unreliably cost-effective for meeting long-term investor goals? What risks exist for investors who adopt minimal cost no-information investment strategies?
The seminar argues that modern finance theory has been in error for more than fifty-five years and institutional quantitative technology inappropriate for investment practice. The misdirections of theory and practice are not the consequence of simple blunders but of a fundamental misunderstanding of the nature of human rational decision making and the existence of a critical mismatch between the precision of computational algorithms and the nature of investment information. Proposals for resolution include applications of late 20th century innovations in statistical estimation procedures and theories of investor behavior consistent with early pioneers in finance and 21st century developments in social group dynamics and modeling.
Syllabus & Schedule
8:45 AM-9:20 AM Registration and breakfast
9:20 AM-9:30 AM Welcome and opening remarks
9:30 AM-10:15 AM Session 1: Birth of Modern Finance and Finance’s Wrong Turn
10:30 AM-11:30 AM Session 2: The Quantitative Asset Management Revolution
11:45 AM-1:00 PM Session 3: Financial Theory in Crisis
1:00 PM-2:15 PM Networking lunch
2:15 PM-3:15 PM Session 4: Markowitz Theory in Practice
3:30 PM-4:15 PM Session 5: The Sociological Theory of Financial Markets.
4:30 PM-5:00 PM Wrap-Up and Q&A
5:00 PM-6:30 PM Reception
Dr. Richard Michaud is President and Chief Executive Officer of New Frontier. He earned a PhD in Mathematics and Statistics from Boston University and has taught investment management at Columbia University. His research and consulting has focused on asset allocation, investment strategies, global investment management, optimization, stock valuation, and trading costs. He is the author of Efficient Asset Management, Investment Styles, Market Anomalies, and Global Stock Selection (CFA Research Monograph 1999), and over 60 published journal articles, manuscripts, and white papers available at SSRN.com and Researchgate.com and on the New Frontier website. He is co-holder of four U.S. patents in portfolio optimization and asset management, a Graham and Dodd Scroll winner for his work on optimization, a former editorial board member of the Financial Analysts Journal, associate editor of the Journal of Investment Management, and former director of the “Q” Group. Dr. Michaud's research was recently profiled in WatersTechnologyM 2019: " Rebel Math ." Notable press articles also include Institutional Investor 2010: Modern Portfolio Theory’s Evolutionary Road, and Pensions & Investments 2003: “Markowitz says Michaud has built a better mousetrap.”
The presentation level requires familiarity with modern financial concepts at an undergraduate finance level, financial practitioner, or CFA level I. There are no mathematical derivations or theorems. The discussion will remain primarily at an intuitive level with exceptions banished to short digressions.
Boston College Club
100 Federal Street
Boston, MA 02210
Description:Members: $150 | Non-Members: $250
Attendees will receive a complimentary copy of Michaud and Michaud, 2008,
Efficient Asset Management 2nd ed. Oxford University Press.
Seating for this unique presentation will be limited. Venue has a beautiful view of the city of Boston. First come first served.
Contact Pauline Hickey with any questions and assistance with hotel reservations.
CE CreditCFA Boston has determined that this event qualifies for 5 CE credit hours under the guidelines of CFA Institute's Continuing Education Program. If you are a CFA Institute member, CE credit for your participation in this event will be automatically recorded in your CE tracking tool.