The Flaws of Finance: James Montier at the CFA Institute

Robert Seawright at Above the Market published his notes from the James Montier presentation at the CFA Institute this week.

The presentation, titled “The Flaws of Finance.” focuses on the trouble with assumptions and models and a regulatory framework that understands neither…

From Above the Market:

  • If you give CAPM and VAR to monkeys, they’re going to create a financial crisis.  Indeed, I think they just did.
  • Remember that models are abstractions and don’t represent reality — they have clear weaknesses (low beta outperforms high beta).
  • CAPM assumes risk is volatility and ignores liquidity and leverage (and that’s nuts).
  • VAR — like a vest that is 95% bulletproof (fails when you need it).
  • Bad models and bad assumptions tend to replace common sense.
  • Graham — the more abstruse the maths, the more uncertain the results (“complexity to impress”).

Robert and I are both big fans of Montier’s work and if you’re serious about allocating capital, you probably are too.

I also liked Tom Brakke’s distillation on the Montier Flaws theme, catch it here at Research Puzzle.

I found the video of the presentation but could not embed it so I linked to it below.  Skip to the 16 minute mark for James Montier’s introduction.

Live Stream Session: The Flaws of Finance (CFA Institute)

Read Also:

CFA Conference: James Montier (Above the Market)

The Flaws of Finance (Research Puzzle)




This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here:

Please see disclosures here.

What's been said:

Discussions found on the web
  1. Immediate Edge Review commented on Sep 21

    … [Trackback]

    […] Find More to that Topic: […]

  2. scotiabank online commented on Nov 22

    … [Trackback]

    […] Find More Info here to that Topic: […]

  3. online reputation management companies commented on Nov 23

    … [Trackback]

    […] Info on that Topic: […]

  4. tangerine online sign in commented on Dec 06

    … [Trackback]

    […] Info to that Topic: […]

  5. 로켓툰 commented on Dec 18

    … [Trackback]

    […] There you will find 94107 additional Info to that Topic: […]

  6. 토토 commented on Dec 24

    … [Trackback]

    […] Here you can find 67016 additional Info to that Topic: […]

  7. 토토패스 commented on Dec 28

    … [Trackback]

    […] Find More Info here on that Topic: […]

  8. Devops commented on Jan 12

    … [Trackback]

    […] Read More to that Topic: […]

  9. commented on Jan 21

    … [Trackback]

    […] There you will find 90894 more Info on that Topic: […]

  10. commented on Jan 26

    … [Trackback]

    […] There you will find 40356 more Info on that Topic: […]

  11. visit this site right here commented on Feb 03

    … [Trackback]

    […] Info to that Topic: […]

  12. what are automation tools commented on Feb 07

    … [Trackback]

    […] Here you can find 32980 more Info on that Topic: […]