Читать книгу Behavioral Portfolio Management - C. Thomas Howard - Страница 26

The widely used mean-variance optimization methodology for constructing portfolios was first introduced in 1952 by 1990 Nobel Prize laureate Harry Markowitz of the Rand Corporation:

“We first consider the rule that the investor does (or should) maximize discounted expected, or anticipated, returns. This rule is rejected both as a hypothesis to explain, and as a maxim to guide investment behavior. We next consider the rule that the investor does (or should) consider expected return a desirable thing and variance of return an undesirable thing. This rule has many sound points, both as a maxim for, and hypothesis about, investment behavior.” ^[15]

Unfortunately, the industry took this approach and mistakenly began building portfolios by minimizing short-term volatility relative to long-term returns. This places emotion at the very heart of the long horizon portfolio construction process. In the context of BPM, the reason this approach became so popular is that it legitimizes the emotional reaction of investors to short-term volatility. I refer to this as the unholy alliance between mean-variance optimization, on the one hand, and emotional investors on the other. This is a classic case of catering to client emotions.

Currently, risk and volatility are frequently thought of as interchangeable. One of the ironies is that, by focusing on short-term volatility when building long-horizon portfolios, it is almost certain that investment risk increases. Since risk is the chance of underperformance, focusing on short-term volatility will often lead to investing in lower expected return markets (e.g. low expected return bonds versus higher expected return stocks) with little impact on long-term volatility. ^[16] Lowering expected portfolio return in an effort to reduce short-term volatility actually increases the chance of underperformance, which means increasing risk.

A clear example of this is the comparison of long-term stock and bond returns. Stocks dramatically outperform bonds over the long run, so by investing in bonds rather than stocks, short-term volatility is reduced at the expense of decreasing the long-term return and, in turn, increasing long-term investment risk. Equating short-term volatility with risk leads to inferior long-horizon portfolios.

The cost of equating risk and emotional volatility can be seen in other areas as well. It is known that many investors pull out of the stock market when faced with heightened volatility, but research shows that this is exactly when they should remain in the market and even increase their stock holdings, as subsequent returns are higher on average while volatility declines. ^[17]

It is also the case that many investors exit after the market declines only to miss the subsequent rebound. This was dramatically the case following the 2008 market crash when investors withdrew billions of dollars from equity mutual funds during a period in which the stock market more than doubled. The end result is that investors frequently suffer the pain of losses without capturing the subsequent gains. ^[18] Again this is the result of not carefully separating emotions from risk and thus allowing emotions to drive investment decisions.