Book
Perfect Portfolio Book
Overview
Is there an ideal portfolio of investment assets, one that perfectly balances risk and reward? In Pursuit of the Perfect Portfolio examines this question by profiling and interviewing ten of the most prominent figures in the finance world—Jack Bogle, Charley Ellis, Gene Fama, Marty Leibowitz, Harry Markowitz, Bob Merton, Myron Scholes, Bill Sharpe, Bob Shiller, and Jeremy Siegel. We learn about the personal and intellectual journeys of these luminaries—which include six Nobel Laureates and a trailblazer in mutual funds—and their most innovative contributions. In the process, we come to understand how the science of modern investing came to be. Each of these finance greats discusses their idea of a perfect portfolio, offering invaluable insights to today’s investors.
Inspiring such monikers as the Bond Guru, Wall Street’s Wisest Man, and the Wizard of Wharton, these pioneers of investment management provide candid perspectives, both expected and surprising, on a vast array of investment topics—effective diversification, passive versus active investment, security selection and market timing, foreign versus domestic investments, derivative securities, nontraditional assets, irrational investing, and so much more. While the perfect portfolio is ultimately a moving target based on individual age and stage in life, market conditions, and short- and long-term goals, the fundamental principles for success remain constant.
Aimed at novice and professional investors alike, In Pursuit of the Perfect Portfolio is a compendium of financial wisdom that no market enthusiast will want to be without.
Perfect Portfolio Book
Overview
Is there an ideal portfolio of investment assets, one that perfectly balances risk and reward? In Pursuit of the Perfect Portfolio examines this question by profiling and interviewing ten of the most prominent figures in the finance world—Jack Bogle, Charley Ellis, Gene Fama, Marty Liebowitz, Harry Markowitz, Bob Merton, Myron Scholes, Bill Sharpe, Bob Shiller, and Jeremy Siegel. We learn about the personal and intellectual journeys of these luminaries—which include six Nobel Laureates and a trailblazer in mutual funds—and their most innovative contributions. In the process, we come to understand how the science of modern investing came to be. Each of these finance greats discusses their idea of a perfect portfolio, offering invaluable insights to today’s investors.
Inspiring such monikers as the Bond Guru, Wall Street’s Wisest Man, and the Wizard of Wharton, these pioneers of investment management provide candid perspectives, both expected and surprising, on a vast array of investment topics—effective diversification, passive versus active investment, security selection and market timing, foreign versus domestic investments, derivative securities, nontraditional assets, irrational investing, and so much more. While the perfect portfolio is ultimately a moving target based on individual age and stage in life, market conditions, and short- and long-term goals, the fundamental principles for success remain constant.
Aimed at novice and professional investors alike, In Pursuit of the Perfect Portfolio is a compendium of financial wisdom that no market enthusiast will want to be without.
What People are Saying
Buzz
“This is a delightfully written account of the finance pioneers who have shaped our understanding of how to build optimal investment portfolios. Masterfully illuminating the lives and wisdom of Nobel Laureates and important investment professionals, In Pursuit of the Perfect Portfolio offers provocative insights for academics and practitioners.”
“Ever wonder if there is a better way to invest? In Pursuit of the Perfect Portfolio does a marvelous job setting out answers by taking readers through the evolution of modern investment management. Combining interesting anecdotes with fulsome explanations, the authors provide a roadmap for how portfolio selection has developed. Accessible to new and experienced investors, this book makes clear that the search for the perfect portfolio is an engaging and never-ending quest.”
“Lo and Foerster construct a ‘perfect portfolio’ of intimate biographies and divergent yet complementary ideas that will inform today’s most thoughtful investors. Not only does this book help individuals determine what approach would best suit them, it also offers institutions a tantalizing blueprint for better personalized investment solutions.”
“This highly rewarding book walks us through the foundations of modern portfolio theory and incorporates the powerful insights of the practitioners who helped make it all happen. A perfect read!”
“Throughout recorded history, people have looked to safeguard their future through the stewardship of their assets. This wonderful book describes how, in the twentieth century, a group of scholars and practitioners developed systematic approaches to this endeavor. By exploring the differences between these pioneers, In Pursuit of the Perfect Portfolio puts forth a framework that enables each of us to reflect on our own investment portfolios.”
“Lo and Foerster tell the stories of ten innovators that helped to produce a revolution in the investing field these past fifty years. The authors delve into the personal histories of these individuals and explain how their innovations have improved investment experiences for millions of investors, big and small. This entertaining book gives a great overview of the development of modern finance.”
“Lo and Foerster have produced an essential book on investing. Everyone should read In Pursuit of the Perfect Portfolio to find out what featured Nobel Laureates and investment thought leaders have to say about choosing the right portfolio mix. The authors do a splendid job of explaining in nontechnical language the similarities and differences in approach among those profiled.”
“What if you could get inside the minds of some of the greatest investors in history? It would be nice if you had a window straight into their heads, but in reality it would take years of hard work to learn to think the way they do. . . . Or, you could simply read. . . . In Pursuit of the Perfect Portfolio.”
Bibliographies and Links
References
If you are interested in learning more about the luminaries and chapter topics we provide references to our source material.
Chapter 1: A Brief History of Investments
Bernstein, William. 2004. The Birth of Plenty: How the Prosperity of the Modern World Was Created. New York: McGraw-Hill.
Buchan, James. 2018. John Law: A Scottish Adventurer of the Eighteenth Century. London: MacLehose.
Chambers, David, Elroy Dimson, and Justin Foo. 2015. “Keynes the Stock Market Investor: A Quantitative Analysis.” Journal of Financial and Quantitative Analysis 50, no. 4: 843-68.
Chatnani, Niti Nandini. 2010. Commodity Markets: Operations, Instruments, and Applications. New Delhi: Tata McGraw-Hill.
Cochrane, John. 2001. “Review of Famous First Bubbles: The Fundamentals of Early Manias by Peter M. Garber.” Journal of Political Economy 109, no. 2: 1150–54.
Cummings, Mike. 2015. “A Living Artifact from the Dutch Gold Age: Yale’s 367-Year-Old Water Bond Still Pays Interest,” YaleNews, September 22.
Garber, Peter. 2000. Famous First Bubbles: The Fundamentals of Early Manias. Cambridge, MA: MIT Press.
Goetzmann, William. 2016. Money Changes Everything. Princeton, NJ: Princeton University Press.
Goetzmann, William, and Stacey Smith. 2019. “A Bond Is Born.” National Public Radio, January 29.
Hoppit, Julian. 2002. “The Myths of the South Sea Bubble.” Transactions of the Royal Historical Society 12: 141–65.
Kampmann, Ursula. 2012a. “The History of Coinage 2—The Cash,” CoinsWeekly, October 10.
———. 2012b. “The History of Coinage 3—China Invents Paper Money.” CoinsWeekly, October 25.
Killgrove, Kristina. 2018. “Meet the Worst Businessman of the 18th Century BC.” Forbes.com, May 11.
Kindleberger, Charles, and Robert Aliber. 2015. Manias, Panics and Crashes: A History of Financial Crises, 7th ed. Hampshire, UK: Palgrave Macmillan.
Kuijt, Ian, and Bill Finlayson. 2009. “Evidence for Food Storage and Predomestication Granaries 11,000 Years Ago in the Jordan Valley.” Proceedings of the National Academy of Sciences of the United States of America 106, , no. 27: 10966–970.
Lo, Andrew, and Jasmina Hassanhodzic. 2010. The Evolution of Technical Analysis: Financial Prediction from Babylonian Tablets to Bloomberg Terminals. Hoboken, NJ: Bloomberg/Wiley.Mackay, Charles. (1841) 2006. Extraordinary Popular Delusions and the Madness of Crowds. Petersfield, UK: Harriman House.
Murphy, Antoin. 1991. “The Evolution of John Law’s Theories and Policies, 1707–1715.” European Economic Review 35, no. 5: 1109–25.
———. 2005. “John Law: Innovating Theorist and Policymaker.” In The Origins of Value: The Financial Innovations That Created Modern Capital Markets, eds., William Goetzmann and Geert Rouwenhorst, 225–38. Oxford: Oxford University Press.
Narron, James, and David Skeie. 2013. “Crisis Chronicles: Tulip Mania, 1633–37.” Ritholz, September 22.
Nath, Virendra. 2015. Out of Aces? Fifty Steps to Financial Acuity. Bloomington, IN: Xlibris.
Neal, Larry. 2005. “Venture Shares and the Dutch East India Company.” In The Origins of Value: The Financial Innovations That Created Modern Capital Markets, ed. William Goetzmann and Geert Rouwenhorst, 165–76. Oxford: Oxford University Press.
Nisen, Max. 2014. “The Fascinating 600-Year History of a French Mill, the World’s Oldest Shareholding Company.” QZ, June 16.
Palaniappan, Raja. 2017. “A Brief History of Derivatives.” Origin Markets, April 14.
Poitras, Geoffrey. 2009. “The Early History of Option Contracts.” In Vinzenz Bronzin’s Option Pricing Models: Exposition and Appraisal, ed. Wolfgang Hafner and Heinz Zimmermann, 487–518. Windisch, Switzerland: Springer.
Rotblut, Charles, and Robert Shiller. 2015. “Understanding Asset Bubbles and How to React to Them.” The American Association of Individual Investors.
Rouwenhorst, Geert. 2016. “Structured Finance and the Origins of Mutual Funds in the 18th-Century Netherlands.” In Financial Market History: Reflections on the Past for Investors Today, ed. David Chambers and Elroy Dimson, 207–26. Charlottesville, VA: CFA Institute Research Foundation.
Sosin, Joshua. 2001. “Accounting and Endowments.” Tyche 16: 161–75.
———. 2014. “Endowments and Taxation in the Hellenistic Period.” Ancient Society 44: 43–89.
Velde, Francois. 2007. “John Law’s System.” American Economic Review 97, no. 2: 276–79.
———. 2009. “Was John Law’s System a Bubble? The Mississippi Bubble Revisited.” In The Origins and Developments of Financial Markets and Institutions: From the Seventeenth Century to the Present, ed. Jeremy Atack and Larry Neal, 99–120. Cambridge: Cambridge University Press.
Weber, Ernst. 2009. “A Short History of Derivative Security Markets.” In Vinzenz Bronzin’s Option Pricing Models: Exposition and Appraisal, ed. Wolfgang Hafner and Heinz Zimmermann, 431–66. Windisch, Switzerland: Springer.
Chapter 2: Harry Markowitz and Portfolio Selection
Bernstein, Peter. 1992. Capital Ideas: The Improbable Origins of Modern Wall Street. New York: Free Press.
Buser, Stephen. 2004. “Markowitz: Interview at Rady School of Management at the University of California San Diego.” StudyLib.
Cowles, Alfred. 1932. “Can Stock Market Forecasters Forecast?” Paper read before a joint meeting of the Econometric Society and the American Statistical Association, Cincinnati, Ohio, December 31, 1932, and reprinted in Econometrica 1 (1933): 309–24.
———. 1938. Common-Stock Indexes, 1871–1937. Bloomington, IN: Principia.
de Finetti, Bruno. 1940. “Il Problemadei ‘Pieni.’” Giornale de ll’Istitutodelgi Attuari 18: 1–88. English version of first chapter reprinted in “The Problem of Full-Risk Insurances,” Journal of Investment Management 4 (2006): 19–43.
Fox, Justin. 2009. The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street. New York: HarperCollins.
Friedman, Milton. 1976. “Milton Friedman—Biographical.” The Nobel Foundation.
Friedman, Milton, and Rose Friedman. 1998. Two Lucky People: Memoirs. Chicago: University of Chicago Press.
Friedman, Milton, and L. J. Savage. 1948. “The Utility Analysis of Choices Involving Risk.” Journal of Political Economy 56, no. 4: 279–304.
Graham, Benjamin, and David Dodd. 1951. Security Analysis. 3rd ed. New York: McGraw-Hill.
Kahneman, Daniel. 2011. Thinking, Fast and Slow. New York: Farrar, Strauss and Giroux.
Kahneman, Daniel, and Amos Tversky. 1979. “Prospect Theory: An Analysis of Decision under Risk.” Econometrica 47: 263–91.
Kaplan, Paul. 2010. “What Does Harry Markowitz Think?” Morningstar Advisor, June–July.
Koopmans, Tjalling. 1975. “Tjalling C. Koopmans—Biographical.” The Nobel Foundation.
Kritzman, Mark. 2011. “The Graceful Aging of Mean-Variance Optimization.” Journal of Portfolio Management (Winter): 3–5.
Maclachlan, Fiona. 2010. “Markowitz Mean-Variance Diagram.” In Figures and Diagrams in Economics, ed. Mark Blaug and Peter Lloyd, 199–203. Cheltenham, UK: Edward Elgar Publishing.
Markowitz, Harry. 1952a. “Portfolio Selection.” Journal of Finance 7, no. 2: 77–91.
———. 1952b. “The Utility of Wealth.” Journal of Political Economy 60, no. 2: 151–58.
———. 1959. Portfolio Selection: Efficient Diversification of Investments. Monograph 16, Cowles Foundation for Research in Economics, Yale University.
———. 1987. Mean-Variance Analysis in Portfolio Choice and Capital Markets. Oxford, UK: Basil Blackwell.
———. 1990. “Foundations of Portfolio Theory.” Nobel Lecture, December 7.
———. 1991. “Harry M. Markowitz—Biographical.” The Nobel Foundation, Nobelprize.org.
———. 1993. “Trains of Thought.” American Economist 37, no. 1: 3–9.
———. 1999. “The Early History of Portfolio Theory: 1600–1960.” Financial Analysts Journal 55, no. 4: 5–16.
———. 2002. “Efficient Portfolios, Sparse Matrices, and Entities: A Retrospective.” Operations Research 50, no. 1: 154–60.
———. 2005. “Market Efficiency: A Theoretical Distinction and So What?” Financial Analysts Journal 61: 17–30.
———. 2006. “De Finetti Scoops Markowitz.” Journal of Investment Management 4: 5–18.
———. 2010. “God, Ants and Thomas Bayes.” American Economist 55, no. 2: 5–9.
———. 2016. Risk-Return Analysis, Vol. 2, The Theory and Practice of Rational Investing. New York: McGraw-Hill.
———. 2020. Risk-Return Analysis, Vol. 3, The Theory and Practice of Rational Investing. New York: McGraw-Hill.
Markowitz, Harry, and Kenneth Blay. 2014. Risk-Return Analysis, Vol. 1, The Theory and Practice of Rational Investing. New York: McGraw-Hill.
Marschak, J. 1938. “Money and the Theory of Assets.” Econometrica 6: 311–25.
———. 1946. “Neumann’s and Morgenstern’s New Approach to Static Economics.” Journal of Political Economy 54, no. 2: 97–115.
———. 1950. “Rational Behavior, Uncertain Prospects, and Measurable Utility.” Econometrica 18, no. 2: 111–41.
Merton, Robert K. 1968. “The Matthew Effect in Science,” Science 159, no. 3810: 56–63.
Roy, A. D. 1952. “Safety First and the Holding of Assets.” Econometrica 20, no. 91: 431–49.
———. 1956. “Risk and Rank or Safety First Generalised,” Economica 23, no. 91: 214–28.
Rubinstein, Mark. 2002. “Markowitz’s ‘Portfolio Selection’: A Fifty-Year Retrospective.” Journal of Finance 57, no. 3: 1041–45.
———. 2006. “Bruno de Finetti and Mean-Variance Portfolio Selection.” Journal of Investment Management 4: 3–4.
Uspensky, J. V. 1937. Introduction to Mathematical Probability. New York: McGraw-Hill.
Wiesenberger, Arthur. 1941. Investment Companies. New York: Arthur Wiesenberger and Company (annual editions since 1941).
Williams, John B. 1938. The Theory of Investment Value. Cambridge, MA: Harvard University Press.
Yost, Jeffrey. 2002. “Oral History Interview with Harry M. Markowitz.” Conducted in San Diego, California, on March 18, 2002, Charles Babbage Institute, Center for the History of Information Technology, University of Minnesota, Minneapolis.
Chapter 3: William Sharpe and the Capital Asset Pricing Model
Arrow, Kenneth, and Gerard Debreu. 1954. “Existence of an Equilibrium for a Competitive Economy.” Econometrica 22, no. 3: 265–90.
Bell, Heather. 2008. “Straight Talk from the Source: William F. Sharpe.” IndexUniverse.
Bernstein, Peter. 1992. Capital Ideas: The Improbable Origins of Modern Wall Street. New York: Free Press.
Buser, Stephen. 2004. “William Sharpe Interview.” American Finance Association History of Finance Videos.
Fama, Eugene. 1968. “Risk, Return and Equilibrium: Some Clarifying Comments.” Journal of Finance 23, no. 1: 29–40.
Fox, Justin. 2009. The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street. New York: HarperCollins.
French, Craig. 2003. “The Treynor Capital Asset Pricing Model.” Journal of Investment Management 1, 60–72.
Gans, Joshua, and George Shepherd. 1994. “How Are the Mighty Fallen: Rejected Classic Articles by Leading Economists.” Journal of Economic Perspectives 8, no. 1: 165–79.
Kavesh, Robert, Fred Weston, and Harry Sauvain. 1970. “The American Finance Association: 1939–1969.” Journal of Finance 25, no. 1: 1–17.
Lansner, Jonathan. 2011. “Hal Durian: Poly Highs Class of 1951 Left Its Mark.” The Press-Enterprise, July 9.
Lintner, John. 1965. “The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets.” Review of Economics and Statistics 47, no. 1: 13–37.
Litzenberger, Robert. 1991. “William F. Sharpe’s Contributions to Financial Economics.” Scandanavian Journal of Economics 93, no. 1: 37–46.
Mehtais, Nina. 2006. “The FEN One-on-One Interview, Eugene Fama.” Financial Engineering News.
Modigliani, Franco, and Merton Miller. 1958. “The Cost of Capital, Corporation Finance and the Theory of Investment.” American Economic Review 48, no. 3: 261–97.
Mossin, Jan. 1966. “Equilibrium in a Capital Asset Market.” Econometrica 34, no. 4: 768–83.
Sharpe, William. 1961. “Portfolio Analysis Based on a Simplified Model of the Relationships among Securities.” PhD diss., University of California, Los Angeles.
———. 1963. “A Simplified Model for Portfolio Analysis.” Management Science 9, no. 2: 277–93.
———. 1964. “Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk.” Journal of Finance 19: 425–42.
———. 1965. “Risk-Aversion in the Stock Market: Some Empirical Evidence.” Journal of Finance 20, no. 3: 416–22.
———. 1966. “Mutual Fund Performance.” Journal of Business 39, no. 1: 119–38.
———.1991b. “William F. Sharpe—Biographical.” The Nobel Foundation.
———. 1992. “Asset Allocation: Management Style and Performance Measurement.” Journal of Portfolio Management 18, no. 2: 7–19.
———. 2002. “Indexed Investing: A Prosaic Way to Beat the Average Investor.” Presented at the Spring President’s Forum, Monetary Institute of International Studies.
———. 2007. Investors and Markets: Portfolio Choices, Asset Prices, and Investment Advice. Princeton, NJ: Princeton University Press.
———. 2009. “There Are No Shortcuts in Investing: Nobel Laureate William Sharpe.” YouTube, October 7, .
Snyder, Thomas D., ed. 1993. “120 Years of American Education: A Statistical Portrait.” National Center for Education Statistics.
Sullivan, Edward. 2006. “A Brief History of the Capital Asset Pricing Model.” APUBEF Proceedings (Fall): 207–10.
Treynor, Jack. 1962. “Toward a Theory of Market Value of Risky Assets.” Unpublished manuscript. Edited version by Craig French, “Jack Treynor’s ‘Toward a Theory of Market Value of Risky Assets,’” SSRN, 2002.
Zweig, Jason. 2007. “The Man Who Explained It All.” Money Magazine.
Chapter 4: Eugene Fama and Efficient Markets
Bachelier, Louis. 1900. Theorie de la Speculation. Paris: Gauthier-Villars. Reprinted in English in Paul Cootner, ed., The Random Character of Stock Market Prices (Cambridge, MA: MIT Press, 1964), 338–72.
Ball, Ray, and Philip Brown. 1968. “An Empirical Evaluation of Accounting Income Numbers.” Journal of Accounting Research 6: 159–78.
Banz, Rolf. 1981. “The Relationship Between Return and Market Value of Common Stocks.” Journal of Financial Economics 9: 3–18.
Basu, Sanjoy. 1977. “Investment Performance of Common Stocks in Relation to Their Price-Earnings Ratios: A Test of the Efficient Market Hypothesis.” Journal of Finance 32: 663–82.
Berg, Eric. 1992. “Market Place; A Study Shakes Confidence in the Volatile-Stock Theory.” The New York Times, February 18.
Black, Fischer, Michael Jensen, and Myron Scholes. 1972. “The Capital Asset Pricing Model: Some Empirical Tests,” in Studies in the Theory of Capital Markets, ed. Michael Jensen, 79–121. New York: Praeger, 79–121.
Clement, Douglas. 2007. “Interview with Eugene Fama.” Federal Reserve Bank of Minneapolis.
Fama, Eugene. 1965a. “The Behavior of Stock-Market Prices.” Journal of Business 38: 34–105.
———. 1965b. “Random Walks in Stock-Market Prices.” Financial Analysts Journal 21 no. 5: 55–59.
———. 1970. “Efficient Capital Markets: A Review of Theory and Empirical Work.” Journal of Finance 25, no. 2: 383–417.
———. 1975. “Short-term Interest Rates as Predictors of Inflation.” American Economic Review 65, no. 3: 269–82.
———. 1976a. Foundations of Finance. New York: Basic Books.
———. 1976b. “Forward Rates as Predictors of Future Spot Rates.” Journal of Financial Economics 3, no. 4: 361–77.
———. 1981. “Stock Returns, Real Activity, Inflation, and Money.” American Economic Review 71, no. 4: 545–65.
———. 1991. “Efficient Capital Markets: II.” Journal of Finance 46, no. 5: 1575–617.
———. 2011. “My Life in Finance.” Annual Review of Financial Economics 3: 1–15.
———. 2013. “Eugene F. Fama—Biographical.” The Nobel Foundation.
———. 2017. The Fama Portfolio: Selected Papers of Eugene Fama. Edited by John Cochrane and Tobias Moskowitz. Chicago: University of Chicago Press.
Fama, Eugene, and Robert Bliss. 1987. “The Information in Long-Maturity Forward Rates.” American Economic Review 77, no. 4: 680–92.
Fama, Eugene, Lawrence Fisher, Michael Jensen, and Richard Roll. 1969. “The Adjustment of Stock Prices to New Information.” International Economic Review 10, no. 1: 1–21.
Fama, Eugene and Kenneth French. 1988a. “Permanent and Temporary Components of Stock Prices.” Journal of Political Economy 96, no. 2: 246–73.
———. 1988b. “Dividend Yields and Expected Stock Returns.” Journal of Financial Economics 22, no. 1: 3–25.
———. 1992. “The Cross-section of Expected Stock Returns.” Journal of Finance 47, no. 2: 427–65.
———. 1993. “Common Risk Factors in the Returns on Stocks and Bonds.” Journal of Financial Economics 33, no. 1: 3–56.
———. 2015. “A Five-Factor Asset Pricing Model.” Journal of Financial Economics 116, no. 1: 1–22.
Fama, Eugene, and James MacBeth. 1973. “Risk, Return, and Equilibrium: Empirical Tests.” Journal of Political Economy 81, no. 3: 607–36.
Fama, Eugene, and Merton Miller. 1972. The Theory of Finance. Hindsdale, IL: Dryden.
Fama, Eugene, and William Schwert. 1977. “Asset Returns and Inflation.” Journal of Financial Economics 3: 115–46.
Fenner, Elizabeth. 2013. “12 Questions for Nobel Prize Winner Eugene Fama.” Chicago Magazine, December 10.
Iovino, Nicholas. 2013. “Medford Native Eugene Fama Wins Nobel Prize in Economics.” Wicked Local, October 15.
Jensen, Michael. 1968. “The Performance of Mutual Funds in the Period 1945–64.” Journal of Finance 23, no. 2: 389–416.
———. 1978. “Some Anomalous Evidence regarding Market Efficiency.” Journal of Financial Economics 6, no. 2-3: 95–101.
Mehtais, Nina. 2006. “The FEN One-on-One Interview, Eugene Fama.” Financial Engineering News.
Roll, Richard. 1977. “A Critique of the Asset Pricing Theory’s Tests, Part 1: On Past and Potential Testability of the Theory.” Journal of Financial Economics 4: 129–76.
Rosenberg, Barr, Kenneth Reid, and Ronald Lanstein. 1985. “Persuasive Evidence of Market Inefficiency.” Journal of Portfolio Management 11, no. 3: 9–16.
Schwert, G. William, and René Stulz. 2014. “Gene Fama’s Impact: A Quantitative Analysis.” Simon Business School Working Paper No. FR 14-17. SSRN.
Chapter 5: John Bogle and the Vanguard Portfolio
Allebrand, Cheryl. 2009. “Advice from the Index-Fund Mastermind.” Bankrate, February 27.
Anson, Mark, Edward Baker, John Bogle, Ronald Kahn, and Meir Statman. 2006. “Putting the Shareholder First: A Lifetime Ideal; A Conversation with John Bogle.” Journal of Investment Consulting 8, no. 1: 8–22.
Armstrong, John [John Bogle]. 1960. “The Case for Mutual Fund Management.” Financial Analysts Journal 16, no. 3: 33–38.
Best, Richard. 2016. “Where Does John C. Bogle Keep His Money?” Investopedia, January 27.
“Big Money in Boston.” 1949. Fortune, December, 116–21, 189–90, 194, 196.
Bogle, John. 1951. “The Economic Role of the Investment Company.” Senior thesis, Princeton University.
———. 2001. John Bogle on Investing: The First 50 Years. Hoboken, NJ: Wiley.
———. 2003a. “The Mutual Fund Industry in 2003: Back to the Future.” The Boston Security Analysts Society, January 14.
———. 2003b. “Whether Markets Are More Efficient or Less Efficient, Costs Matter.” CFA Magazine, November–December.
———. 2004. “Reflections on Wellington Fund’s 75th Birthday.” Bogle Financial Markets Research Center.
———. 2005a. “The Mutual Fund Industry 60 Years Later: For Better or Worse?” Financial Analysts Journal 61, no. 1: 15–24.
———. 2005b. “Relentless Rules of Humble Arithmetic.” Financial Analysts Journal 61, no. 6: 22–35.
———. 2007. The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns. Hoboken, NJ: Wiley.
———. 2011. “How the Index Fund Was Born.” The Wall Street Journal, September 3.
———. 2012. The Clash of the Cultures, Investment vs. Speculation. Hoboken, NJ: Wiley.
———. 2013. “’Big Money in Boston’ . . . The Commercialization of the ‘Mutual’ Fund Industry.” The Boston Security Analysts Society, May 17.
———. 2014a. “The Arithmetic of ‘All-In’ Investment Expenses.” Financial Analysts Journal 70, no. 1: 13–21.
———. 2014b. “Lightning Strikes: The Creation of Vanguard, the First Index Mutual Fund, and the Revolution It Spawned.” Journal of Portfolio Management 40, no. 5: 42–59.
———. 2015. Bogle on Mutual Funds: New Perspectives for the Intelligent Investor. Hoboken, NJ: Wiley.
———. 2016. “The Index Mutual Fund: 40 Years of Growth, Change, and Challenge.” Financial Analysts Journal 72, no. 1: 9–13.
Bogle, John, and Michael Nolan. 2015. “Occam’s Razor Redux: Establishing Reasonable Expectations for Financial Market Returns.” Journal of Portfolio Management 42, no. 1: 119–34.
Boyle, Matthew. 2007. “Be Prepared for a Lot of Bumps.” Fortune.com, December 24.
Breslow, Jason. 2013. “John Bogle: The ‘Train Wreck’ Awaiting American Retirement.” PBS, April 23.
Buerkle, Tom. 2019. “Breakingviews—Jack Bogle Defined Value in More Ways Than One.” Reuters Breakingviews, January 17.
Ehrbar, A. F. 1976. “Index Funds—An Idea Whose Time Is Coming.” Fortune, June, 144–48, 150, 152, 154.
Jaffe, Chuck. 2014. “Vanguard Founder Jack Bogle’s Advice to Fretful Investors: Shut Your Eyes and Let Indexes Do the Work.” MarketWatch, November 3.
Jenkins, Holman, Jr. 2016. “Jack Bogle: The Undisputed Champion of the Long Run,” The Wall Street Journal, September 2.
Levy, Rachael. 2017. “The Man Who Transformed Investing for Main Street Sees a Bleak Future for Wall Street’s Money Managers.” Business Insider, January 24.
McBride, Elizabeth. 2015. “Jack Bogle: Follow These 4 Investing Rules—Ignore the Rest.” CNBC, October 14.
Philips, Christopher. 2014. “Global Equities: Balancing the Home Bias and Diversification.” Vanguard Research. February.
Regan, Michael. 2016. “Q&A with Jack Bogle:’ We’re in the Middle of a Revolution.’” Bloomberg, November 23.
Regnier, Pat. 2015. “Jack Bogle Explains How the Index Fund Won with Investors.” Money, July 27, https://money.com/jack-bogle-index-fund/.
Renshaw, Edward and Paul Feldstein. 1960. “The Case for an Unmanaged Investment Company.” Financial Analysts Journal 16, no. 1: 43–46.
Rostad, Knut, ed. 2013. The Man in the Arena. Hoboken, NJ: Wiley.
Samuelson, Paul. 1974. “Challenge to Judgment.” Journal of Portfolio Management 1, no. 1: 17–19.
———. 1976. “Index-Fund Investing.” Newsweek, August 16, 66.
Slater, Robert. 1997. John Bogle and the Vanguard Experiment: One Man’s Quest to Transform the Mutual Fund Industry. Chicago: Richard D. Irwin.
Sommer, Jeff. 2012. “A Mutual Fund Master, Too Worried to Rest.” The New York Times, August 11.
Chapter 6: Myron Scholes and the Black-Scholes/Merton Option Pricing Model
Ancell, Kate. 2012. “The Origins of the First Index Fund.” University of Chicago Booth School of Business.
Bernstein, Peter. 1992. Capital Ideas: The Improbable Origins of Modern Wall Street. New York: Free Press.
Black, Fischer. 1989. “How We Came Up With the Option Formula.” Journal of Portfolio Management 15, no. 2: 4–8.
Black, Fischer, Michael Jensen and Myron Scholes. 1972. “The Capital Asset Pricing Model: Some Empirical Tests.” In Studies in the Theory of Capital Markets, ed. Michael Jensen, 79-121. Praeger.
Black, Fischer, and Myron Scholes. 1972. “The Valuation of Option Contracts and a Test of Market Efficiency.” Journal of Finance 27: 399–418.
———. 1973. “The Pricing of Options and Corporate Liabilities.” Journal of Political Economy 81, no. 3: 637–54.
———. 1974. “The Effects of Dividend Yield and Dividend Policy on Common Stock Prices and Returns.” Journal of Financial Economics 1: 1–22.
Boness, A. James. 1964. “Elements of a Theory of Stock-Option Values.” Journal of Political Economy 72: 163–75.
Breit, William, and Barry Hirsch. 2009. Lives of the Laureates: Twenty-three Nobel Economists. Cambridge, MA: MIT Press.
Cootner, Paul. 1967. The Random Character of Stock Market Prices. Cambridge, MA: MIT Press.
Lo, Andrew. 2016. “What Is an Index?” Journal of Portfolio Management 42, no. 2: 21–36.
Lowenstein, Roger. 2000. When Genius Failed: The Rise and Fall of Long-Term Capital Management. New York: Random House.
Roll, Richard. 2006. “Myron Scholes—Biographical.” American Finance Association History of Finance Videos.
Scholes, Myron. 1970. “A Test of the Competitive Market Hypothesis: The Market for New Issues and Secondary Offerings.” PhD diss., University of Chicago.
———. 1997. “Myron Scholes—Biographical.” The Nobel Foundation.
———. 1998. “Derivatives in a Dynamic Environment.” American Economic Review 88, no. 3: 350–70.
Scholes, Myron, and Joseph Williams. 1977. “Estimating Betas from Nonsynchronous Data.” Journal of Financial Economics 5, no. 3: 309–27.
Scholes, Myron, Mark Wolfson, Merle Erickson, Michelle Hanlon, Edward Maydew, and Terry Shevlin. 2014. Taxes and Business Strategy: A Planning Approach. : Prentice Hall.
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Chapter 7: Robert Merton, from Derivatives to Retirement
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Goldstein, Douglas. 2014. “How to Retire in a Rapidly Aging World.” Douglas Goldstein’s Instablog, April 28.
Griehsel, Marika. 2004. “Transcript of an Interview with Professor Robert C. Merton.” The Nobel Foundation.
Haoxiang, Cai, 2014. “Retirement for Ordinary People.” The Business Times, January 13.
Jarrow, Robert. 1999a. “Speech in Honor of Robert C. Merton: 1999 Mathematical Finance Day Lifetime Achievement Award.” Internet Archive, April 25.
———. 1999b. “In Honor of the Nobel Laureates Robert C. Merton and Myron S. Scholes: A Partial Differential Equation That Changed the World.” Journal of Economic Perspectives 13, no. 4: 229–48.
Kaufman, Michael. 2003. “Robert K. Merton, Versatile Sociologist and Father of the Focus Group, Dies at 92.” The New York Times, February 24.
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Lo, Andrew. 2020. “Robert C. Merton: The First Financial Engineer.” Annual Review of Financial Economics 12: 1–18.
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———. 1969a. “A Golden Golden-Rule for Welfare Maximization in an Economy with a Varying Population Growth Rate.” Western Economic Journal 7: 307–18.
———. 1969b. “Lifetime Portfolio Selection under Uncertainty: The Continuous-Time Case.” Review of Economics and Statistics 51, no. 3: 247–57.
———. 1970. “Analytical Optimal Control Theory as Applied to Stochastic and Non-Stochastic Economics.” PhD diss., MIT.
———. 1971. “Optimum Consumption and Portfolio Rules in a Continuous-Time Model.” Journal of Economic Theory 3, no. 4: 373–413.
———. 1973a. “Theory of Rational Option Pricing.” Bell Journal of Economics and Management Science 4, no. 1: 141–83.
———. 1973b. “An Intertemporal Capital Asset Pricing Model.” Econometrica 41, no. 5: 867–87.
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———. 1974. “On the Pricing of Corporate Debt: The Risk Structure of Interest Rates.” Journal of Finance 29, no. 2: 449–70.
———. 1992. Continuous-Time Finance. New York: Wiley.
———. 1997a. “Robert C. Merton—Biographical.” The Nobel Foundation.
———. 1997b. “Applications of Option Pricing Theory: Twenty-Five Years Later.” The Nobel Foundation.
———. 1998. “Application of Option-Pricing Theory: Twenty-Five Years Later.” American Economic Review 88, no. 3: 323–49.
———. 2003. “Thoughts on the Future: Theory and Practice in Investment Management.” Financial Analysts Journal 59: 17–23.
———. 2014. “Black-Scholes: Robert Merton on the Options Pricing Model.” Bloomberg Business Week, December 4.
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MIT Sloan School of Management. 2013. “Black-Scholes-Merton: A 40-Year Revolution in Finance.” October 2.
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Patel, Navroz. 2007. “A Model Prophet.” Risk Magazine, July, 40–42.
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Chapter 8: Martin Leibowitz, from Bond Guru to Investment Strategist
Anson, Mark, Edward Baker, Martin Leibowitz, Margaret Towle, and Meir Statman. 2011. “Creating Solutions from a Lifetime of Learning Experiences: Talking Investments with Martin L. Leibowitz, PhD.” Journal of Investment Consulting 12, no. 2: 5–15.
Bernstein, Peter. 2007. Capital Ideas Evolving. Hoboken, NJ: Wiley.
CFA Institute. 2015. “Looking Back: Thoughts from Investment Luminary Martin L. Leibowitz.” Other Webcast Series, April 8.
Dunstan, Barry. 2008. Investment Legends: The Wisdom That Leads to Wealth. Milton, Queensland: Wiley.
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Homer, Sidney, and Martin Leibowitz, with Anthony Bova and Stanley Kogelman. 2013. Inside the Yield Book: The Classic That Created the Science of Bond Analysis. 3rd ed.Hoboken, NJ: Wiley.
Ilmanen, Antti, Martin Leibowitz, and Rodney Sullivan. 2014. “Words from the Wise: Martin Leibowitz.” AQR Capital Management, December 9, Written permission received from AQR to quote from this article.
Langetieg, Terrence, Martin Leibowitz, and Stanley Kogelman. 1990. “Duration Targeting and the Management of Multiperiod Returns.” Financial Analysts Journal 46, no. 5: 35–45.
Leibowitz, Martin. 1986. “Total Portfolio Duration: A New Perspective on Asset Allocation.” Financial Analysts Journal 42, no. 5: 18–29, 77.
———. 1987. “Pension Asset Allocation through Surplus Management.” Financial Analysts Journal 43, no. 2: 29–40.
———. 2004. Franchise Value: A Modern Approach to Security Analysis. Hoboken, NJ: Wiley.
———. 2005. “Alpha Hunters and Beta Grazers.” Financial Analysts Journal 61, no. 5: 32–39.
———. 2006. “Summary of Alpha Hunters and Beta Grazers.’” CFA Digest (February): 66–67.
———. 2010. “Managing Liquidity in Foundations & Endowments: Interview with Martin Leibowitz.” Marcus Evans newsletter.
Leibowitz, Martin, and Anthony Bova. 2005. “Allocation Betas.” Financial Analysts Journal 61, no. 4: 70–82.
Leibowitz, Martin, Anthony Bova, and Brett Hammond. 2010. The Endowment Model of Investing: Return, Risk, and Diversification. Hoboken, NJ: Wiley.
Leibowitz, Martin, Simon Emrich, and Anthony Bova. 2009. Modern Portfolio Management: Active Long/Short 130/30 Equity Strategies. Hoboken, NJ: Wiley.
Meyer, Robinson. 2013. “No Old Maps Actually Say ‘Here Be Dragons.’” The Atlantic, December 12.
Miles, Joseph. 1969. “Formulas for Pricing Bonds and Their Impact on Prices.” Financial Analysts Journal 25, no. 4: 156–61.
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Chapter 9: Robert Shiller and Irrational Exuberance
Benford, James, Jonathan Ostry and Robert Shiller, eds. 2018. Sovereign GDP-Linked Bonds: Rationale and Design. London: CEPR.
Benner, Katie. 2009. “Bob Shiller Didn’t Kill the Housing Market.” Fortune, July 7, .
Campbell, John, and Robert Shiller. 1988. “Stock Prices, Earnings, and Expected Dividends.” the Journal of Finance 43: 661–76.
———. 1998. “Valuation Ratios and the Long-Run Stock Market Outlook.” Journal of Portfolio Management 24, no. 2: 11–26.
Case, Karl, and Robert Shiller. 2003. “Is There a Bubble in the Housing Market?” Brookings Papers on Economic Activity 2, no. 2: 299–362.
Cassidy, John. 2010. “Interview with Eugene Fama.” New Yorker, January 13,.
Clement, Douglas. 2007. “Interview with Eugene Fama.” Federal Reserve Bank of Minneapolis.
Cochrane, John. 2013. “Bob Shiller’s Nobel.” The Grumpy Economist, October 15.
Cowen, Tyler. 2013. “Robert Shiller, Nobel Laureate.” MarginalRevolution, .
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Hilsenrath, John. 2004. “As Two Economists Debate Markets, the Tide Shifts.” The Wall Street Journal, October 18.
Jeffries, Tanya. 2014. “‘We Saw This before the Wall St Crash, the Dot-com Bubble and the Credit Crunch’—How Nobel Economist Robert Shiller’s CAPE Warning Light Is Flashing Again.” This Is Money, September 5.
Kalamazoo College. 2013. “Alumnus Wins Nobel Prize.” October 22.
Kamstra, Mark, and Robert Shiller. 2009. “The Case for Trills: Giving the People and Their Pension Funds a Stake in the Wealth of the Nation.” Cowles Foundation Discussion Paper No. 1717.
Kindleberger, Charles. 2000. Manias, Panics, and Crashes: A History of Financial Crises. 4th ed. New York: Wiley.
Laing, Jonathan. 2005. “The Bubble’s New Home,” Barron’s June 20.
Leonhardt, David. 2005. “Be Warned: Mr. Bubble’s Worried Again.” The New York Times, (August 21).
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Milner, Brian. 2015. “Where Robert Shiller is Putting His Money These Days.” Globe and Mail, January 28.
Read, Colin. 2013. The Efficient Market Hypothesists: Bachelier, Samuelson, Fama, Ross, Tobin and Shiller. New York: Palgrave Macmillan.
Rotblut, Charles, and Robert Shiller. 2015. “Understanding Asset Bubbles and How to React to Them.” The American Association of Individual Investors.
Roth, Daniel, and Robert Shiller. 2000. “Tapping Into Shiller’s Irrational Exuberance.” Fortune, June 26.
Schwartz, Nelson. 2016. “Karl Case, Economist Who Developed Home Price Index, Dies at 69.” The New York Times, July 21.
Shiller, Robert. 1972. “Rational Expectations and the Structure of Interest Rates.” PhD diss., MIT.
———. 1981. “Do Stock Prices Move Too Much to Be Justified by Subsequent Changes in Dividends?” American Economic Review 71, no. 3: 421–36.
———. 2003. “From Efficient Markets Theory to Behavioral Finance.” Journal of Economic Perspectives 17, no. 3: 83–104.
———. 2013a. “Robert J. Shiller—Biographical.” The Nobel Foundation.
———. 2013b. “Speculative Asset Prices.” The Nobel Foundation.
———. 2014. “The Mystery of Lofty Stock Market Elevations.” The New York Times, August 16.
———. 2017. “Narrative Economics.” Cowles Foundation Discussion Paper No. 2069.
Shiller, Robert, and Virginia Shiller. 2011. “Economists as Worldly Philosophers.” American Economic Review: Papers & Proceedings 101, no. 3: 171–75.
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Chapter 10: Charles Ellis and Winning at the Loser’s Game
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———. 1971. “Portfolio Operations.” Financial Analysts Journal 27, no. 5: 36–46.
———. 1975. “The Loser’s Game.” Financial Analysts Journal 31, no. 4: 19–26.
———. 1979. “Investment Policies of Large Corporate Pension Funds.” PhD diss., New York University Graduate School of Business Administration.
———. 2012. “Murder on the Orient Express: The Mystery of Underperformance.” Financial Analysts Journal 68, no. 4: 13–19.
———. 2021. Winning The Loser’s Game, Timeless Strategies for Successful Investing. 8th ed. New York: McGraw-Hill Education.
———. 2014a. “The Rise and Fall of Performance Investing.” Financial Analysts Journal 70, no. 4: 14–23.
———. 2014b. “Seeing Investors’ Reality as Our Profession’s Reality.” CFA Institute Conference Proceedings Quarterly 31, no. 2: 2–7.
———. 2016a. The Index Revolution: Why Investors Should Join it Now. Hoboken, NJ: Wiley.
———. 2017. “The End of Active Investing?.” Financial Times, January 20.
Ellis, Charles, Antti Ilmanen, and Rodney Sullivan. 2015. “Words from the Wise: Charles D. Ellis.” AQR Capital Management.
Lange, James. 2013. “The Elements of Investing with Guest, Charley Ellis.” The Lange Money Hour: Where Smart Money Talks, Episode 97, transcript, April.
MacBride, Elizabeth. 2015. “An Investing Guru Who Wants to Rescue Your Retirement.” CNBC, March 20.
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Pae, Peter, and W. J. Hennigan. 2016. “Simon Ramo Dies at 103; TRW Co-founder Shaped California Aerospace.” Los Angeles Times, June 28.
Powell, Robin. 2016. “Fees for Active Investing More Than 100%—Charley Ellis.” The Evidence-Based Investor, September 20.
Ritholz, Barry. 2015. “Masters in Business: Charley Ellis on the Index Revolution.” Bloomberg Radio podcast.
ThinkAdvisor. 2017. “Charley Ellis: Ease Your Market Anxiety with Index Investing.” February 16.
TIFF Commentary. 2006. “TIFF Endowment Management Seminar 2005—Part II.” The Investment Fund for Foundations, Winter.
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Chapter 11: Jeremy Siegel, the Wizard of Wharton
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———. 1991. “Does It Pay Stock Investors to Forecast the Business Cycle?” Journal of Portfolio Management 18, no. 1: 27–34.
———. 1992a. “The Equity Premium: Stock and Bond Returns since 1802.” Financial Analysts Journal 48, no. 1: 28–38.
———. 1992b. “Equity Risk Premia, Corporate Profit Forecasts, and Investor Sentiment around the Stock Crash of October 1987.” Journal of Business 65, no. 4: 557–70.
———. 1992c. “The Real Rate of Interest from 1800–1990: A Study of the U.S. and the U.K.” Journal of Monetary Economics 29, no. 2: 227–52.
———. 1999a. “Are Internet Stocks Overvalued? Are They Ever.” The Wall Street Journal, April 19.
———. 1999b. “The Shrinking Equity Premium.” Journal of Portfolio Management 26, no. 1: 10–17.
———. 2000. “Big-Cap Tech Stocks Are a Sucker Bet.” The Wall Street Journal, March 14.
———. 2005. The Future for Investors: Why the Tried and the True Triumphs over the Bold and the New. New York: Crown Business.
———. 2014. Stocks for the Long Run: The Definitive Guide to Financial Market Returns & Long-Term Investment Strategies. 5th ed. New York: McGraw-Hill Education.
———. 2016. “The Shiller CAPE Ratio: A New Look.” Financial Analysts Journal 72, no. 3: 41–50.
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Chapter 12: So, What Is the Perfect Portfolio?
Lo, Andrew. 2004. “The Adaptive Markets Hypothesis.” Journal of Portfolio Management 30, no. 5: 15–29.
———. 2012. “Adaptive Markets and the New World Order.” Financial Analysts Journal 68, no. 2: 18–29.
———. 2017. Adaptive Markets: Financial Evolution at the Speed of Thought. Princeton, NJ: Princeton University Press.
Siegel, Jeremy. 1991. “Does It Pay Stock Investors to Forecast the Business Cycle?” Journal of Portfolio Management (Fall): 27–34.
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