Risk Tolerance Assessment

When I attended the Harvard Business School my favorite class was Managerial Economics.  It focused on decision making under uncertainty [1]. The first thing to understand here is the concept of expected value. You determine this by multiplying each outcome by the probability of its occurrence, then adding them all together. For example, the expected…

Do the Right Thing

I used to always cut fruits and veggies in the wrong directions. I finally overcame this problem by turning them in the opposite direction to the way I initially wanted to cut them. Similarly, many investors and investment managers are making investment decisions the wrong way and need to reverse how they are going about…

Maximum Drawdown

There is a new research paper out by Wes Gray and Jack Vogel that is interesting not only to momentum investors but to all investors and researchers. The paper is “Using Maximum Drawdown to Capture Tail Risk.” In it, Wes and Jack show that academic anomalies, identified by linear factor models (alpha), are often not great trading…