Investment Theory - intellectualfinance.com

Pre-Industrial Portfolio Theory: Diversifying Like a Medici Merchant

Diversification, Financial History, Investment Theory

Money is old. Portfolio theory is not. But the instinct behind portfolio theory – do not put everything in one place – is arguably older than written language itself. Long before Harry Markowitz published his Nobel Prize winning work in 1952, merchants in Florence, traders in Constantinople, and farmers in Mesopotamia were already practicing diversification. […]

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How to Profit from Markets That Are Technically “Efficient”

Investing, Financial Markets, Investment Theory

There is a joke in academic finance that goes something like this: two economists are walking down the street when one spots a twenty dollar bill on the ground. He reaches for it, but the other stops him. “Don’t bother,” he says. “If it were real, someone would have already picked it up.” This is,

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The Paradox of Skill: Why Markets Get More Efficient as We Get Smarter

Behavioral Finance, Financial Markets, Investing, Investment Theory

There is a strange thing that happens when everyone in a room gets smarter at the same time. Nobody gains an advantage. The room just gets louder, faster, and more competitive, but the relative distance between people stays roughly the same. Or it shrinks. This is the core tension behind one of the most debated

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1 + 1 = 3: The Illogical Logic of Compound Interest

Growth vs Value, Investing, Investment Theory

Mathematics is supposed to be clean. One plus one equals two. Always has, always will. Except when it comes to compound interest, where one plus one somehow equals three, then five, then eight, then numbers that make your calculator question its own existence. This isn’t magic. It’s not even a trick. It’s just that we

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Stop Chasing the Next Big Thing: Fama-French Proves You Just Need Three

Financial Economics, Investment Theory

Every year, the same story plays out in living rooms and coffee shops around the world. Someone mentions they made a killing on some stock. Everyone else feels a pang of regret. Why didn’t I see that coming? Why am I always late to the party? And so begins another cycle of reading newsletters, watching

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The Bitcoin Problem: Where Does Crypto Fit into a Modern Portfolio Theory Strategy?

Must Read, Editors Pick, Financial Economics, Investment Theory

Harry Markowitz won a Nobel Prize in 1990 for work he published in 1952. That work, Modern Portfolio Theory, changed how we think about investing. Now, seventy years later, a technology he could never have imagined is forcing us to reconsider what his theory actually means. Bitcoin presents a peculiar challenge. It behaves nothing like

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