Montier “…how EMH has damaged our industry” (reprinted with permission)

In this excellent piece from last week, James Montier highlights some flaws in the efficient market hypothesis. More importantly, he outlines the some of the damage – that may take years to repair – caused by the ensuing mentality in the investment community. Beta and alpha debates should move over already. Risk is not volatility. This is a beginning of a trend that I’m seeing of late. The intellectual framework is actually shifting. Consulting firms to big pension funds are reviewing the idea of style boxes. Stagnant asset allocation is being reworked, with emphasis on higher allocations to undervalued assets. Benchmarking is changing. Indexing itself is changing. This piece is a good starting point.

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