If you are a Nassim Nicholas Taleb fan, you need to start by reading Benoit Mandelbrot’s Misbehavior of Markets. CAPM, Beta, EMT, VaR.. you have heard all the theories and formulas related to portfolio diversification and measurement of risk. Mandelbrot does a good job of putting it all together and telling you a story of how modern portfolio theory evolved over the decades. It is very eye opening how modern finance tries to explain the markets and how mechanical the investment process can be.
I think the biggest lesson I learned from reading the book was about volatility in the market. Once it starts, it really isn’t a one day occurrence. It tends to stick around and get more violate as time goes on.
