examining the reasonableness and accuracy of investment advice. Topics such as earnings estimates, security analysts recommendations, and recommendations for selecting mutual funds have been studied extensively. However, almost no attention has been paid to examining advice about the asset allocation decision (the allocation of funds across broad classes of assets). This is surprising because the asset allocation decision has been recognized as a major determinant of return and risk and because of this, advice on the optional allocation decision is provided by most brokerage firms and investment advisors Given the importance of the asset allocation decision we anticipate that the rationality of asset allocation advice will be extensively examined. The purpose of the article is two fold. First, we will examine modern portfolio theory to see what we can learn about the general characteristics of advice that are necessary for consistency with theory. Second, we will examine the advice of some specific investment advisors to see if their advice is consistent with rational behavior. We proceed in three steps. We first review some of the basic tenets of MPT, discuss alternative formulations of the problem, and examine which formulation is appropriate and