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Summary Article: Peter L. Bernstein The foremost chronicler of risk
from QFinance: The Ultimate Resource
LIFE AND CAREER

Peter L. Bernstein is a prolific and award-winning author on finance and risk, and founder and president of Peter L. Bernstein Inc., an international consultancy for institutional investors and corporations. After serving as an intelligence officer in Europe during World War II, he became a member of the research staff at the Federal Reserve Bank of New York. He then taught economics at Williams College and the New School for Social Research in New York, before moving into commercial banking. He was the first editor of the Journal of Portfolio Management, and remains consulting editor. He produces a newsletter on the capital markets and writes regularly for journals and the popular press. He also lectures widely on ris management, asset allocation, portfolio strategy, and market history, and has received major awards for his books.

KEY THINKING
  • Bernstein’s books are popular and insightful; he has taken difficult concepts in finance, mathematics, philosophy, history, and psychology, and made them accessible for a wide audience.

  • In his book, Capital Ideas, he traces the origins of Wall Street, and profiles some of the pioneers of modern investment theory over the years, including Louis Bachelier, Harry Markowitz, William Sharpe, Fischer Black, Myron Scholes, Robert Merton, and Franco Modigliani.

  • In Against the Gods, Bernstein analyzes probability and its applications, using a readable blend of biography, history, and science to examine the role played by famous thinkers in helping the evolution from a superstitious outlook to modern risk management

  • Against the Gods also reviews the history of numerical measurement, probability theory, and the history of financial risk instruments.

  • The book explains probability, uncertainty, the difference between luck and skill, the interactions between gambling and investing, and rational versus irrational decision-making.

IN PERSPECTIVE
  • Bernstein has the ability to combine historical ideas with economics, and the theory and practice of investment management.

  • Capital Ideas explores the development of new theories in risk, valuation, and investment returns, and focuses on the implementation of these theories in the world of investment management. It shows how these theories explain the link between risk and reward, and the advantages of diversification, and provides a clear framework for valuing financial options.

  • Bernstein recently produced a sequel to Capital Ideas, called Capital Ideas Evolving, which defended the theories of the first book, and extended his examination of the key ideas that drive modern financial practice.

  • Against the Gods also shows how the concept of risk originated and traces its progression through history, up to our modern understanding of how it affects us all.

  • It examined Pascal’s Wager in detail, a concept that was ahead of its time in terms of both probability theory and decision theory; it is based on consequences being more important than probabilities.

“The long run ain’t what it used to be. Stocks don’t have to do well in the future because they did well in the past. In fact, the opposite may be more likely.”

Peter L. Bernstein
Copyright © Bloomsbury Information Ltd, 2009, 2011, 2012, 2013, 2014

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