Posts published in “Finance”

The image for this article shows the cycle of human emotions as the stock market goes through booms and busts. Investors should never forget it, especially as we are moving towards the “euphoria” peak, with speculative bubbles growing in tandem. Each time this happens, the bubble comes with a narrative as to why stocks should be so much above normal valuations, or why the rules don’t matter anymore. In the years leading to 2008, everyone was moving to the sunbelt and their properties and mortgages would never go down in value. In 1999, the internet was going to fundamentally change the world in such a way that normal valuations simply wouldn’t apply.…

By Kyu Kim

In our Foundations of Finance class, we all learned about modern portfolio theory. In this brief article, I will summarize this famous theory we learned and how it’s implemented in the real world. I hope Sternies can understand this concept more practically, as it is essential for early retirement plans for young professionals.

According to modern portfolio theory, developed in the 1960s by Harry Markowitz, a Nobel Prize winning economist, risk-averse investors can create an optimal portfolio by holding both risk-free securities as well as risky assets. Given that higher risk is an inherent part of higher reward, this method maximizes expected return based on a given level of market risk.…