Equity Valuation and Portfolio Management

QUESTIONS

1. What is one advantage of viewing the market as an equity core comprised of various style subsets?
2. What are the advantages and disadvantages of a traditional active approach to investing?
3. What are the advantages and disadvantages of a passive approach?
4. What are the advantages and disadvantages of engineered approaches?
5. Name some ways in which an engineered approach can be expanded.
6. What factors might influence the optimal level of residual risk an investor should take?

¹ See Bruce I. Jacobs and Kenneth N. Levy, “How to Build a Better Equity Portfolio,” Pension Management (June 1996): 36-39.

² See Bruce I. Jacobs and Kenneth N. Levy, “High-Definition Style Rotation,” Journal of Investing 5, no. 3 (1996): 14-23.

³ See Daniel Kahneman, and Amos Tversky, “Prospect Theory: An Analysis of Decisions Under Risk,” Econometrica 47, no. 2 (1979): 263-292.

⁴ See Kenneth J. Arrow, “Risk Perception in Psychology and Economics,” Economic Inquiry 20, no. 1 (1982): 1-8.

⁵ See obert J. Shiller, “Stock Prices and Social Dynamics,” Brookings Papers on Economic Activity 2 (1984): 457-510.

⁶ See Bruce I. Jacobs and Kenneth N. Levy, “Engineering Portfolios: A Unified Approach,” Journal of Investing 4, no. 4 (1995): 8-14.

⁷ See Bruce I. Jacobs and Kenneth N. Levy, “20 Myths about Long-Short,” Financial Analysts Journal 52, no. 5 (1996): 81-85.

⁸ See Bruce I. Jacobs and Kenneth N. Levy,“The Long and Short on Long-Short,” Journal of Investing 6, no. 1 (1997): 73-86.

⁹ See Bruce I. Jacobs and ...