The Theory and Practice of Investment Management: Asset Allocation, Valuation, Portfolio Construction, and Strategies, 2nd Edition
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.
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.
CHAPTER 2: Asset Classes, Alternative Investments, Investment Companies, and Exchange-Traded Funds (Mark J. P. Anson, Frank J. Fabozzi, and Frank J. Jones).
Overview of Alternative Asset Products.
Mutual Funds vs. ETFs: Relative Advantages.
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.
Choosing a Portfolio of Risky Assets.
Issues in Portfolio Selection.
CHAPTER 4: Capital Asset Pricing Models (Frank J. Fabozzi and Harry M. Markowitz).
Confusions Regarding the CAPM.
Two Meanings of Market Efficiency.
CAPM Investors Do Not Get Paid for Bearing Risk.
The "Two Beta" Trap.
CHAPTER 5: Factor Models (Guofu Zhou and Frank J. Fabozzi).
Arbitrage Pricing Theory.
Types of Factor Models.
Factor Model Estimation.
Appendix: Principal Component Analysis in Finance.
CHAPTER 6: Modeling Asset Price Dynamics (Dessislava A. Pachamanova and Frank J. Fabozzi).
Financial Time Series.
Arithmetic Random Walks.
Geometric Random Walks.
Advanced Random Walk Models.
CHAPTER 7: Asset Allocation and Portfolio Construction (Noël 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.
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).
The U.S. Equity Markets.
Stock Market Indicators.
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.
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.
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.
Evaluating Results and Updating the Process.
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.
CHAPTER 13: Multifactor Equity Risk Models (Frank J. Fabozzi, Raman Vardharaj, and Frank J. Jones).
Model Description and Estimation.
Applications in Portfolio Construction and Risk Control.
CHAPTER 14: Fundamentals of Equity Derivatives (Bruce M. Collins and Frank J. Fabozzi).
The Role of Derivatives.
Listed Equity Options.
Pricing Stock Index Futures.
OTC Equity Derivatives.
CHAPTER 15: Using Equity Derivatives in Portfolio Management (Bruce M. Collins and Frank J. Fabozzi).
Equity Investment Management.
Portfolio Applications of Listed Options.
Portfolio Applications of Stock Index Futures.
Applications of OTC Equity Derivatives.
Risk and Expected Return of Option Strategies.
PART THREE: Bond Analysis and Portfolio Management.
CHAPTER 16: Bonds, Asset-Backed Securities, and Mortgage-Backed Securities (Frank J. Fabozzi).
General Features of Bonds.
U.S. Treasury Securities.
Federal Agency Securities.
Residential Mortgage-Backed Securities.
Commercial Mortgage-Backed Securities.
CHAPTER 17: Bond Analytics (Frank J. Fabozzi).
Basic Valuation of Option-Free Bonds.
Conventional Yield Measures.
Measuring Interest Rate Risk.
CHAPTER 18: Bond Analytics (Frank J. Fabozzi and Steven V. Mann).
Arbitrage-Free Bond Valuation.
Yield Spread Measures.
Overview of the Valuation of Bonds with Embedded Options.
Valuation of MBS and ABS.
CHAPTER 19: Bond Portfolio Strategies for Outperforming a Benchmark (Bülent Baygün and Robert Tzucker).
Selecting the Benchmark Index.
Creating a Custom Index.
Beating the Benchmark Index.
CHAPTER 20: The Art of Fixed Income Portfolio Investing (Chris P. Dialynas and Ellen J. Rachlin).
The Global Fixed Income Portfolio Manager.
The Global Challenge.
Regulatory Changes, Demographic Trends, and Institutional Bias.
Information in the Markets.
Duration and Yield Curve.
International Corporate Bonds.
International Investing and Political Externalities.
Foreign Investment Selection.
CHAPTER 21: Multifactor Fixed Income Risk Models and Their Applications (Anthony Lazanas, António Baldaque da Silva, Radu Gabudean, and Arne D. Staal).
Approaches Used to Analyze Risk.
Applications of Risk Modeling.
CHAPTER 22: Interest Rate Derivatives and Risk Control (Frank J. Fabozzi).
Interest Rate Futures and Forward Contracts.
Interest Rate Swaps.
Interest Rate Options.
Interest Rate Agreements (Caps and Floors).
CHAPTER 23: Credit Default Swaps and the Indexes (Stephen J. Antczak, Douglas J. Lucas, and Frank J. Fabozzi).
What Are Credit Default Swaps?
Credit Default Swaps Indexes.
About the Web Site.
HARRY M. MARKOWITZ, PHD, is a consultant in the area of finance. In 1990, he was awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for his groundbreaking work in portfolio theory. In 1989, he received the John von Neumann Theory Prize from the Operations Research Society of America for his work in portfolio theory and other applications of mathematics and computers to business practice.