Mark Kritzman

Mark Kritzman is a Founding Partner and Chief Executive Officer of Windham Capital Management, LLC., a privately held research-based asset management firm that he founded in 1988 in New York City. He is responsible for managing research activities and investment advisory services for the now Boston based firm. He is also a founding partner and board member of State Street Associates, an investment research think tank. He teaches a graduate finance course at the MIT Sloan School of Management, where he has served on the faculty since 2003. Kritzman holds a Bachelor of Science degree in economics from St. John's University, a Master of Business Administration with distinction from New York University, and a CFA designation.

Kritzman started his career as a financial analyst at the Equitable Life Assurance Society. Soon after starting with Equitable, Kritzman joined the Investment Advisory Department, which managed the asset allocation of Equitable's pension fund clients. In 1980, Kritzman joined the investment department of AT&T which at the time was the largest fund in the world. At AT&T, he led a research and development group within the Pension Department. Kritzman then joined Bankers Trust, where he focused on risk modeling. In the mid 1980s, Kritzman co-founded New Amsterdam Partners with industry partners Michelle Clayman and Tony Estep to bridge the chasm between the methods of quantitative and fundamental stock analysis. Kritzman’s research papers informed his founding of Windham Capital Management in 1988, where he is the CEO and continues to engage in research and publishing.

Kritzman was a Founding Director of the International Securities Exchange and has served on several boards, including the Institute for Quantitative Research in Finance, The Investment Fund for Foundations, and State Street Associates. He is also a member of several advisory and editorial boards, including the Center for Asset Management at Boston College, the Advisory Board of the MIT Sloan Finance Group, the Consortium for Systemic Risk Analytics, the Emerging Markets Review, the Financial Analysts Journal, the Journal of Alternative Investments, the Journal of Derivatives, the Journal of Investment Management, where he is Book Review Editor, and The Journal of Portfolio Management. He has written numerous articles for academic and professional journals and is the author of six books including Puzzles of Finance and The Portable Financial Analyst.

Kritzman’s work in the field of quantitative finance has resulted in a number of advancements, including the Turbulence Index and the Absorption Ratio.

Turbulence index

In a 1999, Financial Analyst Journal article Kritzman and his co-authors introduced a procedure to address unstable risk parameters by identifying multivariate outliers and using the outliers to estimate a new covariance matrix. Statistical unusualness is used as a proxy for market turbulence. That is, a set of returns is statistically unusual if one or more of the returns are significantly above or below average or if returns interact in an uncharacteristic manner. Turbulence separates historical returns into those associated with random noise (quiet periods) and those associated with events (turbulent periods). This measure has since evolved into the Turbulence Index which shows the interaction among a wide set of assets and can help anticipate broad market sell-offs.

Absorption ratio

In 2010, Kritzman and his co-authors introduced a measure of implied systemic risk called the absorption ratio which captures the extent to which markets are unified. This measure assesses how fragile a market might be based on whether it is “tightly coupled” (unrelated sectors move in unison) or “loosely linked” (little price correlation). Tightly coupled markets are more fragile and thus have systemic risk because shocks can spread more quickly and broadly through them. "For the 1998 crisis, in which tight coupling of other markets to the Russian bond market caught LTCM by surprise, there was a gradual increase in the AR before the event and a gradual decrease after. Similarly, the AR rose gradually up to September 2008 but then jumped abruptly by more than 10 percent and remained elevated for two years. There was a similar pattern in 1929. Although the sample of four crises is small, the tendency for the AR to rise in advance of a crisis event suggests some promise as an early warning measure.

• The Portable Financial Analyst, 2nd edition, 2003, John Wiley & Sons.
• Puzzles of Finance, paperback edition, 2002, John Wiley & Sons.
• Puzzles of Finance, 2000, John Wiley & Sons.
• Currency Management: Concepts and Practices, 1996, AIMR, with R. Clarke.
• Dictionary of Financial Risk Management, 1996 and 1999, Frank J. Fabozzi Associates, with G. Gastineau.
• The Portable Financial Analyst, 1995, McGraw Hill.
• Asset Allocation for Institutional Portfolios, 1990, Richard D. Irwin, Inc.
• Quantitative Methods for Financial Analysis, 1987 and 1990, Dow Jones-Irwin, with S. Brown