An updated guide to the theory and practice of investment management Many books focus on the theory of investment management and leave the details of the implementation of the theory up to you. This book illustrates how theory is applied in practice while stressing the importance of the portfolio construction process. The Second Edition of The Theory and Practice of Investment Management is the ultimate guide to understanding the various aspects of investment management and investment vehicles. Tying together theoretical advances in investment management with actual practical applications, this book gives you a unique opportunity to use proven investment management techniques to protect and grow a portfolio under many different circumstances.* Contains new material on the latest tools and strategies for both equity and fixed income portfolio management* Includes key take-aways as well as study questions at the conclusion of each chapter* A timely updated guide to an important topic in today's investment world This comprehensive investment management resource combines real-world financial knowledge with investment management theory to provide you with the practical guidance needed to succeed within the investment management arena.
About the Editors. Contributing Authors. Foreword. PART ONE: Instruments, Asset Allocation, Portfolio Selection, and Asset Pricing. CHAPTER 1: Overview of Investment Management (Frank J. Fabozzi and Harry M. Markowitz). Setting Investment Objectives. Establishing an Investment Policy. Selecting a Portfolio Strategy. Constructing the Portfolio. Measuring and Evaluating Performance. Key Points. CHAPTER 2: Asset Classes, Alternative Investments, Investment Companies, and Exchange-Traded Funds (Mark J. P. Anson, Frank J. Fabozzi, and Frank J. Jones). Asset Classes. Overview of Alternative Asset Products. Investment Companies. Exchange-Traded Funds. Mutual Funds vs. ETFs: Relative Advantages. Key Points. Questions. CHAPTER 3: Portfolio Selection (Frank J. Fabozzi, Harry M. Markowitz, Petter N. Kolm, and Francis Gupta). Some Basic Concepts. Measuring a Portfolio's Expected Return. Measuring Portfolio Risk. Portfolio Diversification. Choosing a Portfolio of Risky Assets. Issues in Portfolio Selection. Key Points. Questions. CHAPTER 4: Capital Asset Pricing Models (Frank J. Fabozzi and Harry M. Markowitz). Sharpe-Lintner CAPM. Roy CAPM. Confusions Regarding the CAPM. Two Meanings of Market Efficiency. CAPM Investors Do Not Get Paid for Bearing Risk. The "Two Beta" Trap. Key Points. Questions. CHAPTER 5: Factor Models (Guofu Zhou and Frank J. Fabozzi). Arbitrage Pricing Theory. Types of Factor Models. Factor Model Estimation. Keypoints. Appendix: Principal Component Analysis in Finance. Questions. CHAPTER 6: Modeling Asset Price Dynamics (Dessislava A. Pachamanova and Frank J. Fabozzi). Financial Time Series. Binomial Trees. Arithmetic Random Walks. Geometric Random Walks. Mean Reversion. Advanced Random Walk Models. Stochastic Processes. Key Points. Questions. CHAPTER 7: Asset Allocation and Portfolio Construction (Noel Amenc, Felix Goltz, Lionel Martellini, and Vincent Milhau). Asset Allocation and Portfolio Construction Decisions in the Optimal Design of the Performance-Seeking Portfolio. Asset Allocation and Portfolio Construction Decisions in the Optimal Design of the Liability-Hedging Portfolio. Dynamic Allocation Decisions to the Performance-Seeking and Liability-Hedging Portfolios. Key Points. Appendix. Questions. PART TWO: Equity Analysis and Portfolio Management. CHAPTER 8: Fundamentals of Common Stock (Frank J. Fabozzi, Frank J. Jones, Robert R. Johnson, and Pamela P. Drake). Earnings. Dividends. The U.S. Equity Markets. Trading Mechanics. Trading Costs. Stock Market Indicators. Key Points. Questions. CHAPTER 9: Common Stock Portfolio Management Strategies (Frank J. Fabozzi, James L. Grant, and Raman Vardharaj). Integrating the Equity Portfolio Management Process. Capital Market Price Efficiency. Tracking Error and Related Measures. Active vs. Passive Portfolio Management. Equity Style Management. Passive Strategies. Active Investing. Performance Evaluation. Key Points. Questions. CHAPTER 10: Approaches to Common Stock Valuation (Pamela P. Drake, Frank J. Fabozzi, and Glen A. Larsen Jr.). Discounted Cash Flow Models. Relative Valuation Methods. Key Points. Questions. CHAPTER 11: Quantitative Equity Portfolio Management (Andrew Alford, Robert Jones, and Terence Lim). Traditional and Quantitative Approaches to Equity Portfolio Management. Forecasting Stock Returns, Risks, and Transaction Costs. Constructing Portfolios. Trading. Evaluating Results and Updating the Process. Key Points. Questions. CHAPTER 12: Long-Short Equity Portfolios (Bruce I. Jacobs and Kenneth N. Levy). Constructing a Market-Neutral Portfolio. The Importance of Integrated Optimization. Adding Back a Market Return. Some Concerns Addressed. Evaluating Long-Short. Key Points. Questions. CHAPTER 13: Multifactor Equity Risk Models (Frank J. Fabozzi, Raman Vardharaj, and Frank J. Jones). Model Description and Estimation. Risk Decomposition. Applications in Portfolio Construction and Risk Control. Key Points. Questions. CHAPTER 14: Fundamentals of Equ
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