I believe the innovations of the 1970s and ’80s such as CAPM, alpha and beta–which started off being such useful intellectual tools–are now in danger of becoming obstacles to further innovation in financial mathematics. I would argue that too much current research effort, both academic and commercial, in this field has become–to paraphrase John Maynard Keynes–enslaved to some defunct, or not even defunct, economist.—-David Harding
It’s hard to exaggerate how entrenched efficient markets, MPT, and similar ideas have become in finance. For some, acceptance of these ideas has led to a reluctance to even investigate other approaches. When your mind is closed, things have gone too far. For the brave few willing to actually work with the data, relative strength and tactical asset allocation have been a rich source of returns.
