13. The Monster and the Sleeping Queen

Postmodern portfolio theory, as depicted in this book, provides an overarching view of abnormal markets and less than fully rational investor behavior. Whereas market abnormality could be described in terms of econophysics, complete understanding of investor irrationality demands knowledge of neuroscience, evolutionary biology, and epidemiology. A federal court has described agriculture as a field “so vast that fully to comprehend it would require an almost universal knowledge ranging from geology, biology, chemistry and medicine to the niceties of the legislative, judicial and administrative processes of government.”¹ A comparable claim befits finance, particularly as it embraces the perspectives and methodologies of the behavioral sciences.