Research Directions in Portfolio Theory and Equity Valuation

Summary

The document asks what recent ideas might significantly change portfolio theory, portfolio selection and optimization, or equity valuation. It does not present a particular strategy or analysis; instead, a respondent suggests several areas to investigate, including the limitations of traditional portfolio methods and work by Attilio Meucci. These are offered as starting points for further reading rather than as explanations of specific techniques.

The discussion also raises two open-ended research questions: whether behavioral finance can support prescriptive investment decisions, and whether models should account for decisions made by groups rather than by a representative individual. No studies, empirical evidence, or conclusions are provided to resolve these questions. The post is therefore useful as a map of possible research themes, but readers will need to consult the suggested literature and assess its relevance and evidence themselves.

Key ideas

• Traditional portfolio methods have drawbacks that researchers may want to examine.
• The respondent points to Attilio Meucci’s work as a possible source of new portfolio ideas.
• The post asks whether behavioral finance can guide investment decisions, rather than only describe behavior.
• Group decision dynamics are raised as a possible influence on aggregate investment outcomes.

Tags

# Essential new ideas in portfolio theory


# Essential new ideas in portfolio theory












I'm supposed to write an essay on "essential new ideas in my current field of research".

Hence, I'm looking for essential (= it has the potential to change the way we look at the discipline) and new (= the last decade) ideas in the area of portfolio theory, selection and optimization as well as equity valuation.

Frankly, I have difficulties to come up with really "new" and "essential" concepts - any hints from anybody?

Thanks...

## Answer by Alexander Didenko (score 1)

https://quant.stackexchange.com/a/30385

I think, an interesting point to start is this blog post in PortfolioProbe. At least you'll have a feeling about some drawbacks of traditional methods, and how these drawbacks are traditionally offsetted (or failed to be offsetted). Then, I think, papers and book by Attilio Meucci have some interesting ideas. Then, for many years I have heard about progress of behavioral finance, but this theory (as far as I understand) is purely descriptive; do we have something prescriptive, based on BF? I don't know, but would happily read, if there would be something. Finally, another interesting idea is some theory that would encompass somehow the fact, that in reality decisions are made not by 'representative agent', but by group with its own dynamics. Perhaps that might have some implications on aggregated level (or not? That's just an idea.)

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.