Cliff Asness Defends Modern Portfolio Theory

Cliff Asness of AQR Capital Management knows investors have short memories. It is for this reason that some investors, practitioners and academics might tend to disregard Modern Portfolio Theory, he writes in a recent blog post. Markets are not perfectly efficient, Cliff Asness writes as he contradicts a tenant of Modern Portfolio Theory. But this does not mean the baby should be thrown out with the bath water, so to speak. To understand the logic behind Modern Portfolio Theory is to recognize that market environments change and different investments react differently to these changes. Over long periods of time asset…