The mean-variance excuses are just hilarious.

I recently saw someone write: “old theory is taught, so that new and better methods can be appreciated more.”

It’s like a restaurant that intentionally serves you a bad dish, so that you appreciate the next more. I am sure that you prefer just enjoying the good dish and skipping the terrible one.

The reality is that mean-variance can only be justified for building investment intuition. It provides zero practical benefits and can even be a recipe for disaster.

However, people who teach it usually exclude these disclaimers.

It sells better when students are left thinking that they are on track to become the next quant superstar by using the exact same method that is easily available to mom-and-pop investors.

But it’s as illogical as the arguments that are used to justify it.

With today’s technology, we can optimize the tail risks of fully general distributions and large portfolios containing complex instruments.

The more time you spend on mean-variance, the more you fall behind. Do yourself a favor and get started with better methods from the article below: ssrn.com/abstract=40343…