DOW 36000 - Glassman and Hassett Message Board

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Pastimes : DOW 36000 - Glassman and Hassett

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To: noiserider who wrote (27)	1/5/2000 5:08:00 PM
From: Sid Turtlman	Read Replies (1) of 42

Noiserider: Did you write G&H and, if so, did they respond? My guess is that if they did, their response would be to reject any question that wasn't framed well within the context of academic finance theory. Forced to use that language, and therefore to focus on the justification why a given risk premium for stocks seems like the correct one, their assumptions and logic don't seem unreasonable. It is only by seeing the contradictions between that whole way of looking at things and the reality of how the stock market interacts with the real world of capital raising and spending companies, that it becomes clear how ludicrous their work is. G&H are just taking modern portfolio theory and using it to produce some extreme conclusions. The flaw isn't with what they are doing as much as with that whole system of thought, which doesn't take into account how stock prices influence the real economy.

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