Portfolio advice before modern portfolio theory: The Belle Epoque of French analyst Alfred Neymarck

Abstract

In this article, we propose an original analysis of advice given by financial analysts prior to WW1. Our article focuses on the writings of A. Neymarck, one of the most popular French analysts in the early 20 th Century. The creation of portfolios from a new database composed of the monthly returns of all the security types listed on the official Paris Stock Exchange from 1903 to 1912 has provided results demonstrating that Neymarck correctly identified the risk in a number of sectors. The performances of these portfolios, which were built according to Neymarck's guidelines, confirm Neymarck's ranking in terms of both risk and return: the richer the investor, the riskier and the more profitable his portfolio was seen to be. Finally, the Modern Portfolio Theory enables us to pinpoint the few imperfections in Neymarck's advice, which globally appears to be driven by reliable financial analysis.