Cliff Asness: My Top Ten PeevesVW Staff
Saying I have a pet peeve, or some pet peeves, just doesn’t do it. I have a menagerie of peeves, a veritable zoo of them. Luckily for readers, I will restrict this editorial to only those related to investing (you do not want to see the more inclusive list) and to only a mere 10 at that. The following are things said or done in our industry or said about our industry that have bugged me for years. Because of the machinegun nature of this piece, these are mostly teasers. I don’t go into all the arguments for my points, and I blatantly ignore counterpoints (to which I assert without evidence that I have countercounterpoints). Some of these are simple, so perhaps the teaser suffices. But some deserve a more thorough treatment that hopefully I, or someone else, will undertake.
Some are minor, truly deserving the title “peeve,” and some, more weighty. In each case, as befits an opinion piece, it’s not just my discussion of the peeve but the very prevalence of the peeve itself that is my opinion. I do not extensively cite sources for them. I contend that they are rather widespread throughout the land of financial media, pundits, advisers, and managers. Thus, citing one or two sources would be unfair, and citing them all, impossible. Therefore, please feel free to disagree not just with my discussion of the peeves but also about their very existence! Without further ado, here is a list of things held together by only three characteristics: (1) They are about investing or finance in general, (2) I believe they are commonly held and often repeated beliefs, and (3) I think they are wrong or misleading and they hurt investors.
1. “Volatility” Is for Misguided Geeks; Risk Is Really the Chance of a “Permanent Loss of Capital”
There are many who say that such “quant” measures as volatility are flawed and that the real definition of risk is the chance of losing money that you won’t get back (a permanent loss of capital). This comment bugs me.
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H/T Josh Friedlander