September 9, 2021
Profiles in Credit – Professor Stephen Foerster
Featuring: Geoff Castle, Stephen Foerster
In this episode Geoff Castle, Fixed Income Portfolio Manager, chats with Stephen Foerster, Professor of Finance at Western University’s Ivey School of Business.
Subtitle: “In Pursuit of the Perfect Portfolio”
In this episode Geoff Castle, Fixed Income Portfolio Manager, chats with Stephen Foerster, Professor of Finance at Western University’s Ivey School of Business. They discuss Stephen’s thoughts on a variety of topics as laid out in latest book, In Pursuit of the Perfect Portfolio. The book features contributions from a star-studded cast of luminaries who have shaped the investing industry, including six Nobel laureates. Geoff and Stephen dive into detail on the many themes in the book.
|[04:10]||Stephen talks about his time as an undergrad and what motivated him to have a career in academia.|
|[05:50]||Geoff asks Stephen about his time at Wharton and his tutelage under Andrew Lo.|
|[07:01]||Stephen discusses the genesis of his book In Pursuit of the Perfect Portfolio and how he came to collaborate with Andrew Lo.|
|[09:13]||Stephen elaborates on how he and Andrew managed to get such a star-studded list of contributors to the book.|
|[11:50]||Geoff asks Stephen for some details on how he approached the topic of the “perfect portfolio” with his guests.|
|[13:00]||Stephen outlines why he selected the group that he did and how this book is different from books about “investing like the richest people” or “investing like the highest returning investors”.|
|[14:50]||Stephen talks about Modern Portfolio Theory and how it influenced aspects of the book.|
|[15:55]||Geoff asks Stephen to elaborate on some of the themes in the book, starting with the efficient frontier and what it means in portfolio construction.|
|[22:10]||What are the implications for investors considering a world where a lot of people would argue in favor of the market efficiency?|
|[22:50]||Stephen provides a brief lesson on efficient market hypothesis and its variants as well as covering some of the history behind it.|
|[25:10]||What do the Fama-French model and Gillette have in common?|
|[27:10]||Is the efficient market hypothesis exclusive to the US equity market or does it have a global application?|
|[28:35]||The idea of diversification and why Stephen considers it the bedrock of modern Portfolio Theory.|
|[31:35]||Stephen explains the correct way of measuring covariance between two different assets or asset classes.|
|[32:50]||The idea of “buy and hold” versus “timing the market” and whether there is a right way of doing things.|
|[37:50]||Geoff asks Stephen what would be the criteria upon which to add an asset class, versus leaving it out?|
|[40:25]||Geoff asks Stephen about his paper: Retail Financial Advice: Does One Size Fit All.|
|[43:50]||What explains the difference between the portfolios of different retail clients? Is it client age or something else entirely? The answer to this research was surprising.|
|[46:28]||What advice would Stephen have for the typical Canadian financial advisor, having spent his career looking “under the hood” at the data?|
|[47:30]||Geoff asks Stephen what the future of the investment business is and where the trends are going.|
|[48:55]||Geoff closes off the podcast by asking for a book recommendation from Stephen.|
Mentioned in this episode
William F. Sharpe.
Robert C. Merton.
John C. Bogle.
Martin L. Leibowitz.
Charley D. Ellis.
John Y. Campbell.
Retail Financial Advice: Does One Size Fit All?
In Pursuit of the Perfect Portfolio: The Stories, Voices, and Key Insights of the Pioneers Who Shaped the Way We Invest, Andrew W. Lo and Stephen R. Foerster
Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever