Skip to content →

Modern Portfolio Theory And Its Effect on What You Cannot Buy

The other day I wanted to look up some statistics on certain stocks — volatility, correlation with the S&P, etc. I went to yahoo/finance and google/finance, and eventually to a Bloomberg. To my great surprise, all I could easily find was beta. None of these sites or machines told you the volatility of the stock itself, or its correlation, in any direct way, though you could eventually back it out.

Beta, though it is indeed a statistic, the covariance with the market divided by the variance of the market, is of interest because of its role in the capital asset pricing mode. I was quite surprised that it had infiltrated the commercial world to such an extent that they gave you that information without bothering to give you variance or correlation, which are less theoretical in nature and likely at least as useful. This is an indication of how successfully modern portfolio theory, right or wrong, has influenced what you can buy in the way of information.

Interestingly, if you go www.wolframalpha.com… and simply enter the stock symbol, you will find a useful set of information and graphics that is much less theoretically prejudiced and very useful, all obtained by typing one symbol.

Published in Models