I present a simple mathematical model of mutual fund outperformance in terms of the information ratio (IR), that is, a Sharpe ratio in active space. The strength of the model is that it can be used to deduce the likelihood of K-year persistence as a function of IR, either in time series for a...

The practical implications of modern portfolio theory (MPT) are obscured by more than 50 years of academic literature. We shed light on the literature by picking out the few most important implications of MPT. We argue first that what we dub the “Markowitz uncertainty principle” implies that...

I show you how to use the Bloomberg Professional Service (i.e., the “Bloomberg Terminal”) to execute a Benjamin Graham value investing exercise using Bloomberg’s equity screening (EQS) function. I used this exercise very successfully for 15 years in a final-year undergraduate Applied...

The matrix algebra associated with finding minimum variance portfolio weights and tangency portfolio weights is greatly simplified by using an Excel presentation. A further simplification of the tangency portfolio weights process is also presented using excess returns for the risky securities....