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Overview

In investments, portfolio diversification may be the only free lunch. But does it really work?

The global crisis that began in 2008 has called into question many of the basic assumptions and central tenets of Modern Portfolio Theory (MPT). The result is that the benefits of portfolio diversification, the discipline of adhering to a strategic asset allocation policy, and other practical implications of MPT are being challenged. After providing a brief overview of traditional MPT--first developed by Harry Markowitz in 1952, and enhanced in the following decades by numerous scholars and financial economists, including William Sharpe, Robert Merton, and Eugene Fama--Dr. Peng Chen, CFA, will address two key questions:

1. Are asset allocation and portfolio diversification still valid?

2. How should asset allocation and portfolio diversification be implemented in a non-normal world?

About the Speaker(s)

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Peng Chen CFA

Peng Chen, CFA, is chief executive officer of Asia (ex-Japan) at Dimensional Fund Advisors, where he is also a member Dimensional's Investment Policy Committee. Previously, he served as president of the global investment management division at Morningstar and as president and chief investment officer at Ibbotson Associates. Dr. Chen is a member of the Financial Analysts Journal editorial board and a contributing editor for the Asia Financial Planning Journal. He has been awarded the Financial Analysts Journal's Graham and Dodd Scroll Award three times. Dr. Chen holds a BS in industrial engineering from the Harbin Institute of Technology and a MS and PhD in consumer economics from The Ohio State University.

Shreenivas Kunte
Shreenivas Kunte CFA, CIPM

Shreenivas Kunte, CFA, CIPM, is a director of continuing education and advocacy at CFA Institute. In this role, Mr. Kunte contributes to thought leadership in the investment profession. He writes on investing topics in leading publications and represents CFA Institute at conferences and forums. Mr. Kunte serves as an external research scholar at the Indian Institute of Technology Bombay. Previously, he worked as the country trading strategist for Citi in Tokyo, Japan. He holds a degree in computer engineering from the University of Mumbai.

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