Strong words from editor of Financial Analysts Journal
“…I hereby consign the shibboleth of ‘uncorrelated return’ to the scrap heap of asset allocation lingo, where it shall be available only to unscrupulous sellers, credulous buyers, and unschooled investment analysts.”
— Richard M. Ennis, executive editor, Financial Analysts Journal
These strong words from Ennis appeared in in his “Editor’s Corner” entitled “The Uncorrelated Return Myth,” Financial Analysts Journal (Nov./Dec. 2009).
Ennis asserts that “The notion of the existence of ‘uncorrelated return’ assets with handsome risk premiums flies in the face of financial theory and conflicts with empirical evidence.”
When he says “financial theory,” Ennis is referring to the capital asset pricing model, which accords positive risk premiums to market-correlated assets. He also says that evidence shows that so-called uncorrelated assets such as real estate, hedge funds, and private equity are actually highly correlated with the stock market.
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