Outside-the-box risk control = Better returns

After last week's wild market swings, it's time to have a sober discussion about risk control. I know that risk control isn't a sexy topic, but better portfolio risk control can lead to better overall returns.

The framework of analysis will not be the conventional description of risk as it is stylistically shown above. Instead, I offer some "outside the box" thinking and focus on the following:

• Mis-specifying investment objectives and risk preferences
• How to take advantage of volatility
• Regime change risk in the form of:
1. Unexpected tail-risk
2. Changes in market environment (conventional regime change);
3. Slow changing regimes that investors may be unaware of;
4. Changes in modeling assumptions.

The discussion range from practical suggestions for individual investors to big picture issues more relevant to professional portfolio managers.

The full post can be found here.