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Preface | |
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About the Authors | |
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Introduction | |
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In Praise of Mathematical Finance | |
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Studies of the Use of Quantitative Equity Management | |
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Looking Ahead for Quantitative Equity Investing | |
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Financial Econometrics I: Linear Regressions | |
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Historical Notes | |
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Covariance and Correlation | |
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Regressions, Linear Regressions, and Projections | |
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Multivariate Regression | |
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Quantile Regressions | |
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Regression Diagnostic | |
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Robust Estimation of Regressions | |
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Classification and Regression Trees | |
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Summary | |
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Financial Econometrics II: Time Series | |
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Stochastic Processes | |
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Time Series | |
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Stable Vector Autoregressive Processes | |
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Integrated and Cointegrated Variables | |
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Estimation of Stable Vector Autoregressive (VAR) Models | |
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Estimating the Number of Lags | |
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Autocorrelation and Distributional Properties of Residuals | |
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Stationary Autoregressive Distributed Lag Models | |
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Estimation of Nonstationary VAR Models | |
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Estimation with Canonical Correlations | |
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Estimation with Principal Component Analysis | |
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Estimation with the Eigenvalues of the Companion Matrix | |
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Nonlinear Models in Finance | |
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Causality | |
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Summary | |
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Common Pitfalls in Financial Modeling | |
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Theory and Engineering | |
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Engineering and Theoretical Science | |
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Engineering and Product Design in Finance | |
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Learning, Theoretical, and Hybrid Approaches to Portfolio Management | |
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Sample Biases | |
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The Bias in Averages | |
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Pitfalls in Choosing from Large Data Sets | |
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Time Aggregation of Models and Pitfalls in the Selection of Data Frequency | |
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Model Risk and its Mitigation | |
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Summary | |
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Factor Models and their Estimation | |
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The Notion of Factors | |
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Static Factor Models | |
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Factor Analysis and Principal Components Analysis | |
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Why Factor Models of Returns | |
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Approximate Factor Models of Returns | |
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Dynamic Factor Models | |
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Summary | |
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Factor-Based Trading Strategies I: Factor Construction and Analysis | |
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Factor-Based Trading | |
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Developing Factor-Based Trading Strategies | |
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Risk to Trading Strategies | |
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Desirable Properties of Factors | |
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Sources for Factors | |
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Building Factors from Company Characteristics | |
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Working with Data | |
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Analysis of Factor Data | |
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Summary | |
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Factor-Based Trading Strategies II: Cross-Sectional Models and Trading Strategies | |
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Cross-Sectional Methods for Evaluation of Factor Premiums | |
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Factor Models | |
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Performance Evaluation of Factors | |
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Model Construction Methodologies for a Factor-Based Trading Strategy | |
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Backtesting | |
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Backtesting Our Factor Trading Strategy | |
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Summary | |
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Portfolio Optimization: Basic Theory and Practice | |
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Mean-Variance Analysis: Overview | |
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Classical Framework for Mean-Variance Optimization | |
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Mean-Variance Optimization with a Risk-Free Asset | |
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Portfolio Constraints Commonly Used in Practice | |
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Estimating the Inputs Used in Mean-Variance Optimization: Expected Return and Risk | |
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Portfolio Optimization with Other Risk Measures | |
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Summary | |
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Portfolio Optimization: Bayesian Techniques and the Black-Litterman Model | |
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Practical Problems Encountered in Mean-Variance Optimization | |
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Shrinkage Estimation | |
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The Black-Litterman Model | |
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Summary | |
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Robust Portfolio Optimization | |
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Robust Mean-Variance Formulations | |
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Using Robust Mean-Variance Portfolio Optimization in Practice | |
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Some Practical Remarks on Robust Portfolio Optimization Models | |
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Summary | |
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Transaction Costs and Trade Execution | |
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A Taxonomy of Transaction Costs | |
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Liquidity and Transaction Costs | |
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Market Impact Measurements and Empirical Findings | |
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Forecasting and Modeling Market Impact | |
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Incorporating Transaction Costs in Asset-Allocation Models | |
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Integrated Portfolio Management: Beyond Expected Return and Portfolio Risk | |
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Summary | |
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Investment Management and Algorithmic Trading | |
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Market Impact and the Order Book | |
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Optimal Execution | |
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Impact Models | |
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Popular Algorithmic Trading Strategies | |
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What Is Next? | |
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Some Comments about the High-Frequency Arms Race | |
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Summary | |
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Data Descriptions and Factor Definitions | |
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The MSCI World Index | |
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One-Month LIBOR | |
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The Compustat Point-in-Time, IBES Consensus Databases and Factor Definitions | |
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Summary of Well-Known Factors and Their Underlying Economic Rationale | |
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Review of Eigenvalues and Eigenvectors | |
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The SWEEP Operator | |
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Index | |