The point I would most like to emphasise is that it’s often unclear what will happen to an asset when cost-effectiveness goes up. If you’re confident it’ll go up at that time, you buy/overweight it. If you’re confident it’ll go down at that time, you sell/underweight it. If it could go either way, this approach is weaker. Most discussion I have seen on this topic assumes that the ‘evil’ asset can be expected to move in the same direction as cost-effectiveness. Finding something with reliable covariance in either direction seems like it might be most of the challenge.
For more detail on that, here are some notes on the most valuable insights and most significant errors of the original Federal Reserve paper.
My guess is that the best suggestions from this post appear in ‘Applications outside of investment’. These do not fall prey to the abovementioned issues since the mechanisms are different to the investment case, directly exploiting the extra power one gains from being on the inside of an organisation rather than correlation/covariance.
(I might as well note that this comment represents my views on the matter, and no-one else’s, while the main post represents the views of others, and not necessarily mine.)
The point I would most like to emphasise is that it’s often unclear what will happen to an asset when cost-effectiveness goes up. If you’re confident it’ll go up at that time, you buy/overweight it. If you’re confident it’ll go down at that time, you sell/underweight it. If it could go either way, this approach is weaker. Most discussion I have seen on this topic assumes that the ‘evil’ asset can be expected to move in the same direction as cost-effectiveness. Finding something with reliable covariance in either direction seems like it might be most of the challenge.
For more detail on that, here are some notes on the most valuable insights and most significant errors of the original Federal Reserve paper.
My guess is that the best suggestions from this post appear in ‘Applications outside of investment’. These do not fall prey to the abovementioned issues since the mechanisms are different to the investment case, directly exploiting the extra power one gains from being on the inside of an organisation rather than correlation/covariance.
(I might as well note that this comment represents my views on the matter, and no-one else’s, while the main post represents the views of others, and not necessarily mine.)