@techreport{NBERw7170,
 title = "Portfolio Advice for a Multifactor World",
 author = "John H. Cochrane",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "7170",
 year = "1999",
 month = "June",
 URL = "http://www.nber.org/papers/w7170",
 abstract = {Asset returns, it turns out, do not follow the Capital Asset Pricing Model, and are somewhat predictable over time. I survey and interpret the large body of recent work that adapts traditional portfolio theory to answer, what should an investor do about these new facts in finance?  I survey the extension of the famous  2 - fund' theorem to an  N-fund'' theorem in which investors either hedge or assume the additional, non-market, sources of priced risk; I survey the burgeoning literature on time-varying portfolio rules and the Bayesian literature that advocates a great deal of caution. In a survey, I emphasize the risk-sharing nature of asset markets, I note the likelihood that many supposed anomalies will not last, and I emphasize the fact that the average investor must hold the market so portfolio decisions must be driven by differences between an investor and the average investor.},
}