Risk 07: modern portfolio theory should be ditched, says Taleb

Speaking at the Risk 2007 conference in London this morning, he warned that "relying on tools that we use in modern finance, such as sigma, covariance or correlations, actually increases your risk."

Taleb argued that models based on bell-curve assumptions, such as the Gaussian distribution model, fail to capture reality. The possibility of unexpected rare events - black swans - is not factored in, while these events occur much more frequently than is thought. "We have to abandon modern portfolio

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