Niall Ferguson identifies yet another flaw in the system of relative performance measurement in this week's Barron's:
"Ferguson acknowledges this. "If we all get caught in a 1914-style crisis, we all go down together and nobody will underperform the benchmark," he says. "But if I become pessimistic too early and I'm wrong, I definitely will underperform. Therefore it's better to consign a major geopolitical crisis to the realm of uncertainty, and treat it like the risk of an asteroid hitting the earth. Common sense tells us that a major war is much more likely than an asteroid, or indeed the melting of the polar ice caps. But there are incentives for investors and financial professionals to ignore the risk of crises.""
No comments:
Post a Comment