Quantitative Equity Portfolio Management : Modern Techniques and Applications book cover

Quantitative Equity Portfolio Management : Modern Techniques and Applications book cover

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Quantitative Equity Portfolio Management
Modernistic Techniques and Applications

Copyright Twelvemonth 2007

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Quantitative equity portfolio management combines theories and advanced techniques from several disciplines, including financial economics, accounting, mathematics, and operational inquiry. While many texts are devoted to these disciplines, few deal with quantitative equity investing in a systematic and mathematical framework that is suitable for quantitative investment students. Providing a solid foundation in the subject, Quantitative Equity Portfolio Management: Modern Techniques and Applications presents a cocky-contained overview and a detailed mathematical treatment of various topics.

From the theoretical basis of behavior finance to recently developed techniques, the authors review quantitative investment strategies and factors that are commonly used in do, including value, momentum, and quality, accompanied by their academic origins. They nowadays avant-garde techniques and applications in return forecasting models, take a chance management, portfolio construction, and portfolio implementation that include examples such as optimal multi-cistron models, contextual and nonlinear models, factor timing techniques, portfolio turnover control, Monte Carlo valuation of firm values, and optimal trading. In many cases, the text frames related issues in mathematical terms and illustrates the mathematical concepts and solutions with numerical and empirical examples.

Ideal for students in computational and quantitative finance programs, Quantitative Equity Portfolio Direction serves every bit a guide to combat many common modeling problems and provides a rich understanding of portfolio management using mathematical analysis.

Table of Contents

INTRODUCTION: Beliefs, RISK, Procedure
Beliefs
Risks
Quantitative Investment Process

PORTFOLIO THEORY
Distributions of Investment Returns
Optimal Portfolios
Capital Asset Pricing Model (CAPM)
Characteristic Portfolios

RISK MODELS AND RISK Analysis
Arbitrage Pricing Theory and APT models
Adventure Analysis
Contribution to Value at Run a risk

EVALUATION OF ALPHA FACTORS
Alpha Performance Benchmarks-The Ratios
Single Menstruum Skill: Information Coefficient
Multi-Period Ex Ante Data Rati


  • Empirical Examples

    QUANTITATIVE FACTORS
    Value Factors
    Quality Factors
    Momentum Factors

    VALUATION TECHNIQUES AND VALUE CREATION Valuation Framework
    Free Cash Flow
    Modeling Business organization Economics of a Firm
    Cost of Upper-case letter
    Explicit Period, Fade Flow, and Last Value
    Multi-Path Discounted Cash Flow Analysis

    MULTI-FACTOR Alpha MODELS
    Single-Period Composite IC of a Multi-Cistron Model
    Optimal Alpha Model-An Analytical Derivation
    Factor Correlation versus IC Correlation
    Blended Alpha Model with Orthogonalized Factors
    Fama-Macbeth Regression and Optimal Alpha Model

    PORTFOLIO TURNOVER AND OPTIMAL Blastoff MODEL
    Turnover of Stock-still-Weight Portfolios
    Turnover Due to Forecast Alter
    Turnover of Blended Forecasts
    Data Horizon and Lagged Forecasts
    Optimal Alpha Model nether Turnover Constraint
    Small Trades and Turnover

    Advanced ALPHA MODELING TECHNIQUES
    Contextual Modeling
    Mathematical Analysis of Contextual Modeling
    Empirical Examination of Contextual Approach
    Sector versus Contextual Modeling
    Modeling Nonlinear Effects

    Gene TIMING MODELS
    Calendar Effect-Behavioral Reasons
    Calendar Effect-Empirical Results
    The Earning Season Effect
    Macro Timing Models

    PORTFOLIO CONSTRAINTS AND INFORMATION RATIO
    Sector Neutral Constraint
    Long-Short Ration of Unconstrained Portfoli


  • Long-Just Portfolios
    The IR of Long-Only and Long-Curt Portfolios

    TRANSACTION COSTS & PORTFOLIO IMPLEMENTATION
    Components of Transaction Costs
    Optimal Portfolios with Transaction Costs-Single Nugget
    Optimal Portfolios with Transaction Costs-Multi Asset
    Portfolio Trading Strategies
    Optimal Trading Horizon
    Optimal Trading Strategies-Portfolios of Stocks

    • Reviews

    "This book is a must take for quantitative equity managers and it provides a step-past-step illustration of how to build a superior, repeatable investment process. By combining bookish research with applied implementation considerations, the book outlines the theoretical foundation of various marketplace anomalies such as value, momentum, quality, calendar effect, and analyzes their actual performance with existent world portfolios nether institutional setting. The book tin can as well serve equally a valuable text and reference for students and academic researchers in the field. With rigorous mathematical analytics, the book goes beyond the traditional efficient frontier prototype. For case, the objective of maximizing information ratio as a performance measure extends traditional bookish research settings to arrive more than practically relevant. This results in some subtle yet critical analytical insights regarding quantitative factors and strategies. In addition, the mathematical treatment of the nonlinear gene effect and contextual factor model is intuitive and based on fundamental agreement of the market dynamics."
    -Li Jin, Banana Professor of Finance, Harvard Business School, Boston, Massachusetts, Usa

    "Quantitative Equity Portfolio Management sets a new standard for comprehensive assessments of quantitative techniques. The authors' experience every bit practitioners brings to lite disquisitional problems of implementation, such equally transaction costs and turnover, which accept not previously achieved sufficient attention. Overall, the depth, rigor, and elegance of the authors' arroyo to the topic make it a valuable resources for investment professionals everywhere."
    -Bruce MacDonald, Director, Asset Allocation and Hazard Assay, Academy of Virginia Investment Management Company, Charlottesville, U.s.a.

    "Fans of Grinold and Kahn'due south standard text Agile Portfolio Management volition love the new book Quantitative Equity Portfolio Management by Qian, Hua, and Sorensen. Information technology reflects the latest, well-nigh up-to-date thinking on portfolio theory, risk and blastoff modeling, transaction costs, and multiperiod strategies. The authors are good, proven practitioners of the art and active researchers in the field, and take provided an essential handbook covering both theory and many applied implementation bug non available in existing books. This is a must-have addition to the bookshelf of professional person portfolio managers and students of portfolio direction alike. I likewise expect this book will inspire faculty in quantitative finance and fiscal technology to add together more quantitative portfolio management to the usual option pricing material that students learn on their manner to careers in the investments industry."
    -Alec Due north. Kercheval, Associate Professor, Director of Financial Mathematics, Florida State University, Tallahassee, USA

    "… a superb volume for the sophisticated investment practitioner. It brings together rigorous derivation and applied insight beyond the complete spectrum of topics needed for an intelligent investment process. Most importantly, it brings forward detailed methodologies for dealing with subtle, but disquisitional subjects such as alpha decay and optimal trading strategies that are beyond the telescopic of other texts. For many of the states in the field, our only regret virtually the book volition be that nosotros did not write it."
    -Dan diBartolomeo, President, Northfield Information Services, Inc., Boston, Massachusetts, United states