Ineichen looks back (way back) to see future
Dec 26th, 2007 | Filed under: CAPM / Alpha TheoryWith 2007 about to go into the history books, we wondered how the year compared to others in the annals of financial history. One of the keenest observers of financial history has got to be UBS’s Alexander Ineichen. You may remember Ineichen for his 2006 tome Asymmetric Returns (see AllAboutAlpha reviews: parts one, two & three, and our exclusive interview). His primary thesis in that book was that risk management was a source of alpha – that returns which are skewed to the upside (such as hedge funds) are often a better long term investment than traditional equities. A well read student of several disciplines, he drew upon a rich set of historical anecdotes to make his point.
Ineichen presented his latest ideas in a conference hosted by UBS’s Alternative Investment Solutions team in November. His notes were assembled into a document that he passed along to us last week and which are available here. For anyone looking for a thought-provoking big picture view of financial history, this will surely be of interest. For example, to make a point about time frames for risk analysis he presents a timeline that begins at the Big Bang and ends with the implosion of the sun into a white dwarf. That’s a 21 billion year window. Talk about long-term horizon.
He makes a point that we also raised last week in our discussion of black swans – that volatility is itself volatile. Says Ineichen:
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