April 2011
Beginner
704 pages
21h 44m
English
book
The Theory and Practice of Investment Management: Asset Allocation, Valuation, Portfolio Construction, and Strategies, Second Edition
by Frank J. Fabozzi, Harry M. Markowitz
Content preview from The Theory and Practice of Investment Management: Asset Allocation, Valuation, Portfolio Construction, and Strategies, Second Edition
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QUESTIONS
1. What’s “fundamental” about fundamental risk models?
2. A portfolio’s risk can be calculated directly based on the variances of the stocks it holds and their correlations to each other. Why then would a portfolio manager choose to calculate portfolio risk indirectly through a factor-based risk model?
3. Can a portfolio manager diversify away to a negligible level both the common factor risk and the specific risk of a portfolio?
4. Is a bottom-up stock-picker portfolio with 50 stocks riskier than a top-down factor-betting portfolio with 500 stocks?
5. Can a portfolio manager use a multifactor risk model to predict if an active portfolio is at greater risk of underperforming its benchmark than outperforming it over the next period? That is, does the “risk model” predict “risk” in the conventional sense?
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