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Dynamic Asset Allocation: Modern Portfolio Theory Updated for the Smart Investor Hardcover – February 17, 2010


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Dynamic Asset Allocation: Modern Portfolio Theory Updated for the Smart Investor + Portfolio Design: A Modern Approach to Asset Allocation + The New Science of Asset Allocation: Risk Management in a Multi-Asset World
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Product Details

  • Hardcover: 256 pages
  • Publisher: Bloomberg Press; 1 edition (February 17, 2010)
  • Language: English
  • ISBN-10: 1576603598
  • ISBN-13: 978-1576603598
  • Product Dimensions: 9.3 x 5.9 x 0.9 inches
  • Shipping Weight: 1.3 pounds (View shipping rates and policies)
  • Average Customer Review: 2.8 out of 5 stars  See all reviews (6 customer reviews)
  • Amazon Best Sellers Rank: #900,026 in Books (See Top 100 in Books)

Editorial Reviews

Review

"Picerno's look at modern portfolio theory's evolution offers a timely reminder that the design and management of asset allocation is still the critical element for successful investing."
— Harold Evensky, CFP
President, Evensky & Katz Wealth Management
 
"What Peter Bernstein did for the history of portfolio theory in Capital Ideas, Picerno does for its real-world application. He captures the nuanced soup of theory, markets, and investor behavior better than any other writer on investing."
— Patrick Geddes
Cofounder and Chief Investment Officer, Aperio Group
Former CFO and Director of Quantitative Research, Morningstar Inc.
 
"Picerno puts the tires to the pavement on Peter Bernstein's 2003 proclamation that the policy portfolio is dead. Picerno masterfully articulates the implications that follow from the notion that although the market portfolio may be efficient, markets may not be."
— Rodney N. Sullivan, CFA
Editor, Financial Analysts Journal at CFA Institute
 
"Dynamic Asset Allocation is cogently written in a very readable style. James Picerno presents readers with a wonderful history of the developments in asset allocation and then profides an excellent frameword for investors to utitilize the discipline of asset allocation in their own portfolio-composition process. Any serious investor will want to have this book in their library."
— Gary P. Brinson
President, GP Brinson Investments

About the Author

James Picerno is a financial journalist who has been writing about finance and investment theory for more than twenty years. He currently contributes to trade magazines for financial professionals and financial advisers, edits The Beta Investment Report, and writes the finance blog, the Capital Spectator. He has written for Barron’s, Investment Advisor, Mutual Funds, and Bloomberg Markets.

More About the Author

I'm an independent journalist focused on investment strategy, economics and econometric analysis of markets and the business cycle. I edit The Capital Specatator blog (capitalspectator.com) and write for various publications, ranging from Financial Advisor magazine to The Atlantic. I'm also the author of Dynamic Asset Allocation: Modern Portfolio Theory Updated For The Smart Investor (Bloomberg Press, 2010).

Customer Reviews

2.8 out of 5 stars
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Most Helpful Customer Reviews

15 of 16 people found the following review helpful By David Merkel on February 12, 2011
Format: Hardcover
James Picerno writes the popular blog The Capital Spectator. One of his main topics is asset allocation. He has a book coming out in February called Dynamic Asset Allocation: Modern Portfolio Theory Updated for the Smart Investor.

Asset allocation is important. It determines much of the returns investors will receive.

This book goes into a long discussion of modern portfolio theory, and the author finds MPT to be valuable, but needs to be supplemented by other factors other than the market portfolio. Market capitalization, individual stock valuation, and overall market cheapness/dearness plays a role in asset allocation. This rectifies the main complaint of value investors regarding asset allocation, in that relatively lower prices should lead investors to allocate more to an asset class.

There are elements of my own view here, which says that asset allocation should look at sustainable yield levels adjusted for the likelihood of those yields occurring, and the potential for downside risk.

Also, the author spends time on the special situations of asset allocation for the individual or institution -- how old you are, or, what industry you are in. I experienced that at one firm I was at where I managed the profit sharing assets. We underweighted financials because our firm did well when financials did well. We did not want employees worrying about their assets if the firm was having a bad year.

I recommend the book, but it is not a popular book. Average people will not get a lot out of it. The book requires a moderate knowledge of finance to make it valuable to the reader.
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2 of 2 people found the following review helpful By investingbythebooks on January 12, 2013
Format: Hardcover
James Picerno is a journalist who has been writing about finance for more than twenty years. Well, he sure picked up a lot of things on the way. Apart from a whole lot of knowledge he acquired a religion, the faith of Modern Portfolio Theory (MPT) and its belief in efficient markets in equilibrium. This book is one part biased chronological odyssey of academic papers on portfolio theory and one part useful discussion on how to compose a multi asset portfolio.

The first five chapters give the reader an overview of the development of the academic field of portfolio theory, but it doesn't begin with Harry Markowitz's Portfolio Selection in 1952 as would be customary. Picerno instead begins two decades earlier with the 1934 publication of Ben Graham's and David Dodd's book Security Analysis and the notion that the return on an investment depends on the price you pay for it. An obvious statement that was for a long time forgotten by financial academia. After this the author introduces the standard building blocks of MPT with a) Markowitz's notion that investors want to optimize returns and risk (measured as volatility); b) James Tobin's Security Market Line; c) Bill Sharpe's conclusion that the market cap weighted portfolio of all assets is the optimal portfolio and d) Paul Samuelson's research on the randomness of securities prices that lead Eugene Fama to proclaim markets efficient.

Enter the 80's and cracks in MTP start to emerge with the discoveries of numerous so called anomalies and the papers showing that CAPM doesn't do the job. Hence the current religious war amongst rationalist and behavioural explanations starts. The author is buried in the trenches of the rationalists. He even tries to make the crash in 1987 and the TMT-bubble into "rational bubbles".
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Format: Hardcover Verified Purchase
This is a good book for an overview of the historical evolution of portfolio management.
On the positive side, it summarizes what is important to consider on modern portfolio management, updated to current date.
On the negative side, the author is repetitive between chapters, the book could be half in size, but what really is missing is a more practical approach to implement the portfolio management strategy exposed.
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