Posted by: Tobias | August 15, 2008

Eating your own dogfood

The American Economic Association recently convened an ad hoc committee to decide how to invest the association’s funds. So there they were, tenured professors, a former chairman to the Council of Economic Advisors, in short: the cream of the crop of scholars in finance. And what did they discuss? The Chronicle of Higher Education reports (via Greg Mankiw):

According to the minutes of the association’s budget committee, the meeting provoked “a lengthy discussion about whether economists should use economics to guide investment decisions.”

So much for believing in your own theories. In the end, however, they did let current thinking in the field guide their portfolio allocations. Most of the money went out of bonds and into an S&P500 index fund (gotta take advantage of that equity premium) and the new portfolio overweighs foreign equity (to benefit from the home bias that seems to be priced in currently).

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