Friday, October 08, 2010

Nassim Taleb dances on Merton Miller's grave

People are using Sharpe theory that vastly underestimates the risks they’re taking and overexposes them to equities. I’m not blaming them for coming up with the idea, but I’m blaming the Nobel for giving them legitimacy. No one would have taken Markowitz seriously without the Nobel stamp.
I don't remember Einstein dancing on Newton's grave. I guess Taleb is no Einstein. In fact, I'd bet there'll be a lot more dancing over his.

What does Taleb credit the reduction of starvation and improved mortality since 1952, if not greater capital formation resulting from improved asset pricing, that funded the innovation and economies of scale in the food and medical industries (as well as every other industry)?

Maybe asset returns don't behave like the heat equation as much as the Nobelists claimed. Well, even if someone finds improved expressions for the heat equation, it doesn't mean that Fourier wasn't a smart guy who helped people progress.

Someday, someone will point out Taleb should not have conferred so much legitimacy on himself.

Via Eddy Elfenbein.

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