ESCP Europe

There are few people with better insight into investment management than Pascal Blanqué. After the warm welcome with which the book Essays in Positive Investment Management was received, the author is publishing a third, expanded edition. Here he reports on situations experienced by investors which clearly break the rules and norms of accepted rationality, for example when the fall in the price of an asset is accompanied, contrary to the classical hypotheses, by a fall in demand. He outlines a general theory of the fields of choice and the marginal rates of substitution within the framework of a specific referential of the economic subject, of a psychological nature and structured by time-values, and the framework of a limited rationality. In this important and timely book, Blanqué made a powerful claim for positive investment in order to avoid fanciful illusions. He assigned it the task of understanding what is happening in todays world. Blanqué argued that the investment world contains many elements of a fairy tale and showed that a mere confrontation with reality leaves its mark on the impressive procession of theoretical, sacred cows, of established beliefs and truths as does the confrontation with crises. These essays accordingly included an objective assessment of the disciplines sacred cows and explored a number of ways to renew traditional approaches. The book contains, in particular, a discussion of the notion of liquidity as the missing element of the modern portfolio theory; together with the changes in macro-financial regime as a key determining factor for investment strategies. There has never been such a need for sound management to bridge the gap between abundant savings and unsatisfied investment requirements. We need new ways to rechannel investment management for the good. We need more investment science not less." - from backcover

Foreword --- PART I: BEYOND THE SACRED COWS. ALLOCATING TO THE LONG RUN --- Essay 1: Sacred cows --- Essay 2: The long-term --- Essay 3: Allocation --- Essay 4: Revisiting the concepts of active and passive management --- PART II: THE DYNAMICS OF THE FINANCIAL MARKETS --- Essay 5: Value, liquidity and stock markets --- Essay 6: The cycle, liquidity and interest rates --- Essay 7: Exchange rates, prices without equilibrium --- Essay 8: Searching for reference points: Investing in Understanding --- PART III: DURATION, MEMORY, FORGETFULNESS AND ASSET PRICES --- Essay 9: Anatomy of the stock market --- Essay 10: Money, memory and the interest rate --- Essay 11: Psychological time, value and language --- PART IV: RISKS OF THE UNKNOWN. LIQUIDITY AND OTHER MISSING LINKS OF MPT --- Essay 12: Investing in a QE-infested world. The map and the territory --- Essay 13: The reincarnation of diversification --- Essay 14: Liquidity function, savings accelerator and multiplication effects --- PART V: THE ECONOMIC AND FINANCIAL PSYCHE --- Essay 15: Phenomenology of economic and financial perception --- PART VI: THE MACRO-FINANCIAL REGIME-FLASHBACKS --- Essay 16: Macro-economic forms of risk the economics of disequilibrium (I) --- Essay 17: Macro-economic forms of risk (ctd): The normal and the pathological (II) --- Essay 18: Forces for change --- PART VII: THE DYNAMIC OF THE FIELDS OF CHOICE --- Essay 19: Marginal psychological returns and fundamental prices --- Bibliography.