Riesgo y eficiencia de mercado

Si a uds les gusta pensar que invertir en bolsa les va a hacer ricos, lean cuidadosamente lo que sigue. Cullen Roche, en su libro "Pragmatic Capitalism",

sobre la teoría moderna de gestión de activos y la teoría de eficiencia de los mercados financieros. Después de leer estos párrafos, piense que estas creencias son la base de la inversión en bolsa.

MPT and EMH suffer from what I believe are several flaws in the foundation of such thinking: Beta, or risk, is not the same thing as volatility (which is how academics quantify risk).

Because modern portfolio theory assumes that risk equals volatility, the theory assumes that asset price returns are normally distributed. Correlations are not static. Therefore returns can vary according to different macroeconomic environments.

Markets work with highly imperfect information obtained by highly imperfect participants, rendering their conclusions imperfect and at times completely wrong. The efficient market hypothesis and modern portfolio theory assume that risk is something that can be quantified and measured. Risk is generally calculated as equivalent to volatility, or standard deviation. This makes it easy to calculate and works great in a textbook. But volatility is not equivalent to risk.

Risk is much more than volatility. In fact volatility might even make a portfolio less risky. For most practical purposes financial risk is defined as the potential that we will not meet our financial goals. This is not the same thing as volatility, and perhaps investors should not rely entirely on such a narrow definition to steer the portfolio process.

The second point is an extension of the first point. Modern portfolio theory assumes that asset price returns are normally distributed because risk equals volatility. However, the actual returns of markets do not always validate this view. There are far too many outlier events within markets to validate such a view. Nassim Taleb refers to these events as “black swans.”

Black swans shouldn’t exist in a world in which returns are expected to follow a normal distribution. This is in part why academic models failed for Long-Term Capital Management in 1998 and could not protect banks against the rare event of a 30 percent decline in housing prices (as they did during the housing bust). It’s also why the academic models failed to recognize that the stock market is susceptible to crashes like those in 1987 and 2008.

The third point can be best understood by looking at the macroeconomic environment since the mid-1980s, a period in which bonds have largely performed in line with equities. Modern portfolio theory, using static correlations and a relatively small data set of past information, would never have predicted such a thing. Yet some of the greatest risk-adjusted returns since the mid-1980s (an entire portfolio time horizon for most people) came from simply holding one of the lowest-risk asset classes.

The error in MPT was that the theory is based on expected future returns, variance, and risk that do not hold true through all portfolio periods. And if you just so happen to be living during one of those periods when the back-tested assumptions fail, then, as Harry Markowitz, the father of MPT, states: “The point where the assumptions break down . . . lead[s] to distastrous consequences.”

Additionally, MPT and EMH assume that market participants are rational. But numerous studies show that this is far from the truth. Most of us are highly irrational and, more important, working with information or an understanding that is often deficient or inaccurate. This means that the market price is always the market price, but that doesn’t always mean the market price is the right price.

Financial markets are extremely complex systems that are widely misunderstood and are being interpreted by highly deficient participants.