Capital Ideas: From the Past to the Future

Abstract

Modern finance theory, modern portfolio theory, neoclassical economics - the ideas bestowed on us in 1952-1973 by the giants in our field - are alive and well. Challenges to the efficient market theory, the capital asset pricing model, and mean-variance efficiency have been raised, but while recognizing that the assumptions of the theories do not hold up empirically, we still lean on the ideas and develop them in new directions. To say that this body of work is obsolete is to say that Aristotle and Euclid are obsolete.

Keywords: Investment Theory, CAPM, APT and Other Pricing Theories, Behavioral Finance, Investment Industry, Future Directions and Sources of Change