Scientific Advice
At a technical level Lloyd Tevis's investment process is a synthesis of work conducted over more than a century by financial researchers. We acknowledge here some of the foundational work in this field as well as some significant developments out of those foundations which have either informed our own work or moved parallel to it.
1900
Louis Bachelier, Theory of Speculation, Thesis at the Sorbonne, Paris. Translated by Mark Davis and Alison Etheridge and published by Princeton University Press, Princeton NJ 2006 – developed the mathematical theory of stochastic processes and applied it to financial instruments.
1938
Alfred Cowles III et al., Common Stock Indices 1871-1937, Cowles Commission For Research In Economics, monograph no. 3, Principa Press, Bloomington Indiana – defined the return potential of the US equity asset class through a massive statistical study executed without electronic computers.
1947
John von Neumann and Oskar Morgenstern, Theory of Games and Economic Behavior, 2nd ed. Princeton University Press, Princeton NJ – gave conditions under which the optimal choice in the face of uncertainty is to maximize expected utility.
1947
George B. Dantzig, Maximization of a Linear Function of Variables Subject to Linear Inequalities, in T.C. Koopmans (ed) Activity Analysis of Production and Allocation, John Wiley and Sons, New York 1951 – provided a practical algorithm for maximizing functions subject to constraints.
1952
Harry M. Markowitz, Portfolio Selection in The Journal of Finance vol. 7 no. 1 p. 77-91 March 1952 – formulated portfolio selection as maximization of a constrained utility function incorporating expected risk, returns and investor risk aversion.
1969
Robert Merton, Lifetime Portfolio Selection Under Uncertainty: The Continuous Time Case in Review of Economics and Statistics vol. 51, August 1969 p. 247-57, Harvard University Press, Cambridge MA – showed that investor risk aversion is a function of the investor's spending plans.
1973
Barr Rosenberg, Michel Houglet and Vinay Marathe, Extra Market Components of Covariance Among Security Prices, in Research Papers in Finance no. 13 (1973), School of Business, University of California Berkeley. Republished as Rosenberg and Marathe, Journal of Financial and Quantitative Analysis, March 1974 p. 263-274 – showed that equity risk can be characterized through analysis of panel data sets of returns and fundamental characteristics.
1980
Barr Rosenberg and Andrew Rudd, The "Market Model" in Investment Management, Journal of Finance, vol. 35 no. 2 May 1980 p. 599-607 – discusses sensitivity to model misspecification.
1982
Barr Rosenberg and Andrew Rudd, Factor Related and Specific Returns of Common Stocks:
Serial Correlation and Market Inefficiency in Thomas Farquar, Returns Expectations in Active Management Journal of Finance vol. 37 no. 2 p. 543-554 May 1982 – further discussion of model robustness.
1982
Robert Engle, Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation, in Econometrica vol. 50 no. 4 p. 987-1008 – adapted time series methods to give a dynamic view of risk.
1982
Roger Ibbotson and Rex Sinquefield, Stocks, Bonds, Bills and Inflation1926-1982, originally published 1982 by The Research Foundation of the Institute of Chartered Financial Analysts, Charlottesville, VA and continued since as an annual yearbook with updated title by Ibbotson Associates (now part of Morningstar Inc.) – extended the Cowles program to additional, mainly US based, asset classes.
1995
Richard Grinold and Ron Kahn, Active Portfolio Management: Quantitative Theory and Applications, Probus Publishing Co., Chicago Il – systematic discussion of the opportunity to add value through active management.
2000
Nicolo G. Torre, Dan Stefek, Fati Hemmati, Pei Chen, and Alexander Zheleznyak, An Integrative Approach to Modeling the World Equity Market, Barra, Berkeley CA – showed that fundamental risk models of individual asset classes can be combined into a multi-asset class analysis of risk.
2002
Elroy Dimson, Paul Marsh, Michael Staunton, Triumph of the Optimists, Princeton University Press, Princeton NJ – extends the Cowles program to international asset classes.
2002
John Y. Campbell and Luis M. Viceira, Strategic Asset Allocation: Portfolio Choice for Long- Term Investors, Oxford University Press, Oxford – review and extension of the line of research building on Merton 1969.
2004
Nicolo G. Torre and Andrew Rudd, The Portfolio Management Problem of Individual Investors, The Journal of Wealth Management, vol. 7, Summer 2004 – systematic adaption of quantitative investment methodology to the case of the individual investor.
2009
William Meyer and William Reichenstein, Social Security: When Should You Start Benefits and How to Minimize Longevity Risk, Journal of Financial Planning, vol. 23 no. 23 p. 45-59, March 2010 – optimizing the value of the real options embedded in the social security benefit.
2015
David M. Blanchett and Philip V Straehl, No Portfolio is an Island, Financial Analysts Journal vol. 71 no. 3 p. 15-33 May 2015 – documents the need for a holistic approach to portfolio construction.
Precision InvestingTM means investment management founded on scientific research.