This title offers a comprehensive look at the tools and techniques used in quantitative equity management. Some books attempt to extend portfolio theory, but the real issue today relates to the practical implementation of the theory introduced by Harry Markowitz and others who followed. The purpose of this book is to close the implementation gap by presenting state-of-the art quantitative techniques and strategies for managing equity portfolios. Throughout these pages, Frank Fabozzi, Sergio Focardi, and Petter Kolm address the essential elements of this discipline, including financial model building, financial engineering, static and dynamic factor models, asset allocation, portfolio models, transaction costs, trading strategies, and much more. They also provide ample illustrations and thorough discussions of implementation issues facing those in the investment management business and include the necessary background material in probability, statistics, and econometrics to make the book self-contained. Written by a solid author team who has extensive financial experience in this area, this title presents state-of-the art quantitative strategies for managing equity portfolios. It focuses on the implementation of quantitative equity asset management. It outlines effective analysis, optimization methods, and risk models. In today's financial environment, you have to have the skills to analyze, optimize and manage the risk of your quantitative equity investments. This guide offers you the best information available to achieve this goal
Ch. 1 Introduction 1
Ch. 2 Financial Econometrics I: Linear Regressions 47
Ch. 3 Financial Econometrics II: Time Series 101
Ch. 4 Common Pitfalls in Financial Modeling 159
Ch. 5 Factor Models and Their Estimation 195
Ch. 8 Factor-Based Trading Strategies I: Factor Construction and Analysis 243
Ch. 7 Factor-Based Trading Strategies II: Cross-Sectional Models and Trading Strategies 269
Ch. 8 Portfolio Optimization: Basic Theory and Practice 313
Ch. 9 Portfolio Optimization: Bayesian Techniques and the Black-Litterman Model 361
Ch. 10 Robust Portfolio Optimization 395
Ch. 11 Transaction Costs and Trade Execution 419
Ch. 12 Investment Management and Algorithmic Trading 449
App. A Data Descriptions and Factor Definitions 473
App. B Summary of Well-Known Factors and Their Underlying Economic Rationale 487
App. C Review of Eigenvalues and Eigenvectors 493