Featured Papers and Interviews with Industry Thought Leaders
In 1952, the American economist Harry Markowitz published a paper titled 'Portfolio Selection’. In it, he introduced the concept of "the efficient frontier" which he described as a collection of portfolios that contain the highest returns for a given amount of risk. The paper later gave rise to Modern Portfolio Theory and the process by which an asset’s risk-return profile is evaluated not just on a standalone basis, but in terms of its effects on the entire portfolio. In 1990, the paper earned Mr. Markowitz the Nobel Prize for Economics.
Nearly 70 years since the publication of this seminal work, asset managers, consultants, and investors alike are still applying some of these same concepts. To drill down further into the calculation of risk at the portfolio level is a function of both the standard deviation and the correlations of the assets held within the portfolio. These pairwise correlations, which are by no means static, remain crucial to multi-asset portfolio managers and to the creation of efficient portfolios.
This Special Report explores the drivers of change in the prevailing stock-bond correlation regime, and the implications of correlation regime shifts for multi-asset investors.