RR #193 - (Modern) Modern Portfolio Theory

Today on Rational Reminder we take a deep dive into the evolution of modern portfolio theory. We kick the show off with some updates and reviews on some of the brilliant shows and books we are watching right now. A key item from this selection is Stolen Focus: Why You Can’t Pay Attention and the points it makes about the value of flow state for learning and creativity. After this week’s news stories, we get into the main topic, and Ben starts with a breakdown of portfolio theory as it was laid out by Harry Markowitz in 1952. From there we talk about research that shaped the current understanding of portfolio theory, exploring the distinction between the mean-variance efficient portfolio and the multi-factor efficient portfolio, and how they theoretically combine to make the market portfolio. One of the biggest takeaways here is that your financial asset portfolios can look the same in terms of asset allocation but the person with more macroeconomic risk in the remainder of their financial situation is taking on more risk. Additionally, even if somebody is the perfect candidate to be the mean-variance investor and they could theoretically tilt toward value, it doesn’t necessarily mean they have to. We wrap up our conversation by inviting our good friend Larry Swedroe onto the show to speak about his love of reading and share his methods for incorporating what he learns from books into his work and thinking. Timestamps: https://www.seevid.ir/fa/w/5YrL2BR0MNM Intro https://www.seevid.ir/fa/w/5YrL2BR0MNM Cameron's Recommendations https://www.seevid.ir/fa/w/5YrL2BR0MNM News Stories of the Week https://www.seevid.ir/fa/w/5YrL2BR0MNM The Evolution of Modern Portfolio Theory https://www.seevid.ir/fa/w/5YrL2BR0MNM Discussion w/ Larry Swedroe Books From Today’s Episode: Stolen Focus: Why You Can't Pay Attention — and How to Think Deeply Again — https://amzn.to/3JCxJKw Portfolio Selection: Efficient Diversification of Investments — https://amzn.to/3NoxzJd Links From Today’s Episode: Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder Website — https://rationalreminder.ca/ Shop Merch — https://shop.rationalreminder.ca/ Join the Community — https://community.rationalreminder.ca/ Follow us on Twitter — https://twitter.com/RationalRemind Follow us on Instagram — @rationalreminder Benjamin on Twitter — https://twitter.com/benjaminwfelix Cameron on Twitter — https://twitter.com/CameronPassmore Larry Swedroe — https://twitter.com/larryswedroe 22 in 22 Reading Challenge — Join the Rational Reminder’s 22 in 22 reading challenge! Ben’s Reading Code (22 in 22 Challenge): 7XWESMK Cameron’s Reading Code (22 in 22 Challenge): N62IPTX

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