The Theory and Practice of Investment Management: Asset Allocation, Valuation, Portfolio Construction, and Strategies, Second Edition

The Theory and Practice of Investment Management: Asset Allocation, Valuation, Portfolio Construction, and Strategies, Second Edition

by Frank J. Fabozzi, Harry M. Markowitz
Released April 2011
Publisher(s): Wiley
ISBN: 9780470929902

Read it now on the O’Reilly learning platform with a 10-day free trial.

O’Reilly members get unlimited access to books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.

Start your free trial

Book description

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.

This ebook does not include access to the companion materials.

Table of contents

  1. The Frank J. Fabozzi Series
  2. Title Page
  3. Copyright Page
  4. About the Editors
  5. Contributing Authors
  6. Foreword
  7. PART One - Instruments, Asset Allocation, Portfolio Selection, and Asset Pricing
    1. CHAPTER 1 - Overview of Investment Management
      1. SETTING INVESTMENT OBJECTIVES
      2. ESTABLISHING AN INVESTMENT POLICY
      3. SELECTING A PORTFOLIO STRATEGY
      4. CONSTRUCTING THE PORTFOLIO
      5. MEASURING AND EVALUATING PERFORMANCE
      6. KEY POINTS
    2. CHAPTER 2 - Asset Classes, Alternative Investments, Investment Companies, and ...
      1. ASSET CLASSES
      2. OVERVIEW OF ALTERNATIVE ASSET PRODUCTS
      3. INVESTMENT COMPANIES
      4. EXCHANGE-TRADED FUNDS
      5. MUTUAL FUNDS VS. ETFs: RELATIVE ADVANTAGES
      6. KEY POINTS
      7. QUESTIONS
    3. CHAPTER 3 - Portfolio Selection
      1. SOME BASIC CONCEPTS
      2. MEASURING A PORTFOLIO’S EXPECTED RETURN
      3. MEASURING PORTFOLIO RISK
      4. PORTFOLIO DIVERSIFICATION
      5. CHOOSING A PORTFOLIO OF RISKY ASSETS
      6. ISSUES IN PORTFOLIO SELECTION
      7. KEY POINTS
      8. QUESTIONS
    4. CHAPTER 4 - Capital Asset Pricing Models
      1. SHARPE-LINTNER CAPM
      2. ROY CAPM
      3. CONFUSIONS REGARDING THE CAPM
      4. TWO MEANINGS OF MARKET EFFICIENCY
      5. CAPM INVESTORS DO NOT GET PAID FOR BEARING RISK
      6. THE “TWO BETA” TRAP
      7. KEY POINTS
      8. QUESTIONS
    5. CHAPTER 5 - Factor Models
      1. ARBITRAGE PRICING THEORY
      2. TYPES OF FACTOR MODELS
      3. FACTOR MODEL ESTIMATION
      4. KEY POINTS
      5. APPENDIX: PRINCIPAL COMPONENT ANALYSIS IN FINANCE
      6. QUESTIONS
    6. CHAPTER 6 - Modeling Asset Price Dynamics
      1. FINANCIAL TIME SERIES
      2. BINOMIAL TREES
      3. ARITHMETIC RANDOM WALKS
      4. GEOMETRIC RANDOM WALKS
      5. MEAN REVERSION
      6. ADVANCED RANDOM WALK MODELS
      7. STOCHASTIC PROCESSES
      8. KEY POINTS
      9. QUESTIONS
    7. CHAPTER 7 - Asset Allocation and Portfolio Construction
      1. ASSET ALLOCATION AND PORTFOLIO CONSTRUCTION DECISIONS IN THE OPTIMAL DESIGN OF ...
      2. ASSET ALLOCATION AND PORTFOLIO CONSTRUCTION DECISIONS IN THE OPTIMAL DESIGN OF ...
      3. DYNAMIC ALLOCATION DECISIONS TO THE PERFORMANCE-SEEKING AND LIABILITY-HEDGING PORTFOLIOS
      4. KEY POINTS
      5. APPENDIX
      6. QUESTIONS
  8. PART Two - Equity Analysis and Portfolio Management
    1. CHAPTER 8 - Fundamentals of Common Stock
      1. EARNINGS
      2. DIVIDENDS
      3. THE U.S. EQUITY MARKETS
      4. TRADING MECHANICS
      5. TRADING COSTS
      6. STOCK MARKET INDICATORS
      7. KEY POINTS
      8. QUESTIONS
    2. CHAPTER 9 - Common Stock Portfolio Management Strategies
      1. INTEGRATING THE EQUITY PORTFOLIO MANAGEMENT PROCESS
      2. CAPITAL MARKET PRICE EFFICIENCY
      3. TRACKING ERROR AND RELATED MEASURES
      4. ACTIVE VS. PASSIVE PORTFOLIO MANAGEMENT
      5. EQUITY STYLE MANAGEMENT
      6. PASSIVE STRATEGIES
      7. ACTIVE INVESTING
      8. PERFORMANCE EVALUATION
      9. KEY POINTS
      10. QUESTIONS
    3. CHAPTER 10 - Approaches to Common Stock Valuation
      1. DISCOUNTED CASH FLOW MODELS
      2. RELATIVE VALUATION METHODS
      3. KEY POINTS
      4. QUESTIONS
    4. CHAPTER 11 - Quantitative Equity Portfolio Management
      1. TRADITIONAL AND QUANTITATIVE APPROACHES TO EQUITY PORTFOLIO MANAGEMENT
      2. FORECASTING STOCK RETURNS, RISKS, AND TRANSACTION COSTS
      3. CONSTRUCTING PORTFOLIOS
      4. TRADING
      5. EVALUATING RESULTS AND UPDATING THE PROCESS
      6. KEY POINTS
      7. QUESTIONS
    5. CHAPTER 12 - Long-Short Equity Portfolios
      1. CONSTRUCTING A MARKET-NEUTRAL PORTFOLIO
      2. THE IMPORTANCE OF INTEGRATED OPTIMIZATION
      3. ADDING BACK A MARKET RETURN
      4. SOME CONCERNS ADDRESSED
      5. EVALUATING LONG-SHORT
      6. KEY POINTS
      7. QUESTIONS
    6. CHAPTER 13 - Multifactor Equity Risk Models
      1. MODEL DESCRIPTION AND ESTIMATION
      2. RISK DECOMPOSITION
      3. APPLICATIONS IN PORTFOLIO CONSTRUCTION AND RISK CONTROL
      4. KEY POINTS
      5. QUESTIONS
    7. CHAPTER 14 - Fundamentals of Equity Derivatives
      1. THE ROLE OF DERIVATIVES
      2. LISTED EQUITY OPTIONS
      3. FUTURES CONTRACTS
      4. PRICING STOCK INDEX FUTURES
      5. OTC EQUITY DERIVATIVES
      6. STRUCTURED PRODUCTS
      7. KEY POINTS
      8. QUESTIONS
    8. CHAPTER 15 - Using Equity Derivatives in Portfolio Management
      1. EQUITY INVESTMENT MANAGEMENT
      2. PORTFOLIO APPLICATIONS OF LISTED OPTIONS
      3. PORTFOLIO APPLICATIONS OF STOCK INDEX FUTURES
      4. APPLICATIONS OF OTC EQUITY DERIVATIVES
      5. RISK AND EXPECTED RETURN OF OPTION STRATEGIES
      6. KEY POINTS
      7. QUESTIONS
  9. PART Three - Bond Analysis and Portfolio Management
    1. CHAPTER 16 - Bonds, Asset-Backed Securities, and Mortgage-Backed Securities
      1. GENERAL FEATURES OF BONDS
      2. U.S. TREASURY SECURITIES
      3. FEDERAL AGENCY SECURITIES
      4. CORPORATE BONDS
      5. MUNICIPAL SECURITIES
      6. ASSET-BACKED SECURITIES
      7. RESIDENTIAL MORTGAGE-BACKED SECURITIES
      8. COMMERCIAL MORTGAGE-BACKED SECURITIES
      9. KEY POINTS
      10. QUESTIONS
    2. CHAPTER 17 - Basic Valuation, Yield Measures, and Interest Rate Risk Measures
      1. BASIC VALUATION OF OPTION-FREE BONDS
      2. CONVENTIONAL YIELD MEASURES
      3. TOTAL RETURN
      4. MEASURING INTEREST RATE RISK
      5. KEY POINTS
      6. QUESTIONS
    3. CHAPTER 18 - Spot Rates, Forward Rates, Yield Spreads, and Valuation
      1. ARBITRAGE-FREE BOND VALUATION
      2. YIELD SPREAD MEASURES
      3. FORWARD RATES
      4. OVERVIEW OF THE VALUATION OF BONDS WITH EMBEDDED OPTIONS
      5. LATTICE MODEL
      6. VALUATION OF MBS AND ABS
      7. KEY POINTS
      8. QUESTIONS
    4. CHAPTER 19 - Bond Portfolio Strategies for Outperforming a Benchmark
      1. SELECTING THE BENCHMARK INDEX
      2. CREATING A CUSTOM INDEX
      3. BEATING THE BENCHMARK INDEX
      4. KEY POINTS
      5. QUESTIONS
    5. CHAPTER 20 - The Art of Fixed Income Portfolio Investing
      1. THE GLOBAL FIXED INCOME PORTFOLIO MANAGER
      2. THE GLOBAL CHALLENGE
      3. PORTFOLIO PARAMETERS
      4. REGULATORY CHANGES, DEMOGRAPHIC TRENDS, AND INSTITUTIONAL BIAS
      5. INFORMATION IN THE MARKETS
      6. DURATION AND YIELD CURVE
      7. VOLATILITY
      8. INTERNATIONAL CORPORATE BONDS
      9. INTERNATIONAL INVESTING AND POLITICAL EXTERNALITIES
      10. FOREIGN INVESTMENT SELECTION
      11. CURRENCY SELECTION
      12. KEY POINTS
      13. QUESTIONS
    6. CHAPTER 21 - Multifactor Fixed Income Risk Models and Their Applications
      1. APPROACHES USED TO ANALYZE RISK
      2. APPLICATIONS OF RISK MODELING
      3. KEY POINTS
      4. QUESTIONS
    7. CHAPTER 22 - Interest Rate Derivatives and Risk Control
      1. INTEREST RATE FUTURES AND FORWARD CONTRACTS
      2. INTEREST RATE SWAPS
      3. INTEREST RATE OPTIONS
      4. INTEREST RATE AGREEMENTS (CAPS AND FLOORS)
      5. KEY POINTS
      6. QUESTIONS
    8. CHAPTER 23 - Credit Default Swaps and the Indexes
      1. WHAT ARE CREDIT DEFAULT SWAPS?
      2. CREDIT DEFAULT SWAPS INDEXES
      3. KEY POINTS
      4. QUESTIONS
  10. About the Web Site
  11. Index
  12. Solutions

Product information

  • Title: The Theory and Practice of Investment Management: Asset Allocation, Valuation, Portfolio Construction, and Strategies, Second Edition
  • Author(s): Frank J. Fabozzi, Harry M. Markowitz
  • Release date: April 2011
  • Publisher(s): Wiley
  • ISBN: 9780470929902