Читать книгу Competitive Advantage in Investing - Steven Abrahams - Страница 31

The work of Harry Markowitz highlights the trade-off between risk and reward and the power of diversification. Sharpe and others then argue heroically that all investors should hold some combination of cash and a market portfolio. Markowitz's emphasis on risk and reward and diversification remains as powerful and practical today as it did when he first published his seminal paper. Sharpe's CAPM, however, although offering an appealing elegance, has proven a poor explanation of investment returns in practice. Asset prices clearly depend on more than broad exposure to market risk. And the very work that tested CAPM ends up planting the seeds of a more nuanced approach.

The richest grounds for new thinking come from work that focuses on the ability of investors to use the leverage at the center of CAPM. CAPM assumes investors can borrow without limit at the riskless rate and leverage the market portfolio into expected returns well above an unleveraged portfolio of risky assets (figure 4.1), but if borrowing is limited, investor behavior changes. And so does asset pricing.

A complete inability to borrow at the riskless rate has long had potential to explain the flat capital markets line. Fischer Black and his colleagues started making that case in the 1970s (Black, 1972; Black, Jensen, and Scholes, 1972). Borrowers may not be able to borrow at the riskless rate, but they may be able to sell assets short. That usually involves borrowing a security from another owner, selling the security to generate cash, and then buying the security back later and returning it to the original owner. If borrowers can sell assets short and use the cash proceeds to leverage a portfolio, then Black shows the capital markets line will look flatter than CAPM predicts. A complete lack of borrowing, however, is unrealistic. Some banks, some insurers, and portfolios affiliated with government agencies, for instance, routinely borrow at nearly riskless rates. A wide set of other portfolios take out loans secured by nearly riskless debt and can borrow substantial amounts at nearly riskless rates. Portfolios that hold US Treasury debt, for example, can borrow $0.98 for every $1 of market value. Riskless or nearly riskless borrowing is clearly available.

Figure 4.1 CAPM critically assumes unlimited leverage.