There is a foundational crisis in financial theory and professional investment practice: There
is little if any credible evidence that active investment strategies and traditional
institutional quantitative technologies are able to provide superior risk-adjusted
cost-adjusted return over investment relevant horizons.Economic and financial theory has been
in error for more than fifty years and is the fundamental cause of the persistent
ineffectiveness of professional asset management. Contemporary sociological and economic theory
agent-based modeling and an appreciation of the social context for preference theory provides
a rational and intuitive framework for understanding financial markets and economic behavior.
The author narrates his long-term experience in the use and limitations of traditional tools of
quantitative asset management as an institutional asset manager in practice and as a
quantitative analyst and strategist on Wall Street. Monte Carlo simulation methods modern
statistical tools and U.S. patented innovations are introduced to redefine portfolio
optimality and procedures for enhanced professional asset management. A new social context for
expected utility theory leads to a novel understanding of modern equity markets as a financial
intermediary for purchasing power constant time-shift investing uniquely appropriate for
meeting investor long-term investment objectives.This book addresses the limitations and
indicated resolutions for more useful financial theory and more reliable asset management
technology. In the process it traces the major historical developments of theory and
institutional asset management practice and their limitations over the course of the 20th
century to the present including Markowitz and the birth of modern finance CAPM theory and
emergence of institutional quantitative asset management CAPM and VM theory limitations and
ineffective iconic tools and strategies and innovations instatistical methodologies and
financial market theory.
