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Can we make any reasonable assumptions about the future ?Can we assume that a diversified portfolio of stocks will be correlated with a separate diversified portfolio of stocks ?Can we assume that the return on two portfolios of stocks will be more closely correlated than the returns on a portfolio of stocks and say bonds ?I have always just assumed that the best strategy is to be 100% in equities all the time and now I am not so sure. My understanding of the central tenet of Modern Portfolio Theory that the volatility on a diverse portfolio of stocks is lower than the volatility of the individual component stocks ? Are you rejecting this ? Or are you rejecting CAPM, beta and subsequent developments ?Brendan
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