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| Preface | |
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| Abstract | |
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| About the Authors | |
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| Introduction: Beliefs, Risk, and Process | |
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| Beliefs | |
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| Risk | |
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| Quantitative Investment Process | |
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| Information Capture | |
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| The Chapters | |
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| Psychology and Behavior Finance | |
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| Advances in Psychology | |
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| Behavioral Finance | |
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| Behavioral Models | |
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| References | |
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| Endnotes | |
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| Portfolio Theory | |
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| Distributions of Investment Returns | |
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| Optimal Portfolios | |
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| Capital Asset Pricing Model | |
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| Characteristic Portfolios | |
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| Problems | |
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| References | |
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| Risk Models and Risk Analysis | |
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| Arbitrage Pricing Theory and Apt Models | |
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| Risk Analysis | |
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| Contribution to Value at Risk | |
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| Problems | |
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| References | |
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| Evaluation of Alpha Factors | |
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| Alpha Performance Benchmarks: The Ratios | |
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| Single-Period Skill: Information Coefficient | |
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| Multiperiod Ex Ante Information Ratio | |
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| Empirical Examples | |
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| Problems | |
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| References | |
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| Quantitative Factors | |
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| Value Factors | |
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| Quality Factors | |
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| Momentum Factors | |
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| Factor Definition | |
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| Net Operating Assets (NOA) | |
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| References | |
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| Endnotes | |
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| Valuation Techniques and Value Creation | |
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| Valuation Framework | |
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| Free Cash Flow | |
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| Modeling the Business Economics of a Firm | |
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| Cost of Capital | |
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| Explicit Period, Fade Period, and Terminal Value | |
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| An Example: Cheesecake Factory, Inc. (Cake) | |
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| Multipath Discounted Cash Flow Analysis | |
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| Multipath DCF Analysis (MDCF) | |
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| Summary | |
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| Problems | |
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| References | |
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| Endnotes | |
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| Multifactor Alpha Models | |
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| Single-Period Composite IC of a Multifactor Model | |
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| Optimal Alpha Model: An Analytical Derivation | |
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| Factor Correlation vs. IC Correlation | |
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| Composite Alpha Model with Orthogonalized Factors | |
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| Fama-Macbeth Regression and Optimal Alpha Model | |
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| Problems | |
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| Inverse of a Partitioned Matrix | |
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| Decomposition of Multivariate Regression | |
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| References | |
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| Portfolio Turnover and Optimal Alpha Model | |
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| Passive Portfolio Drift | |
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| Turnover of Fixed-Weight Portfolios | |
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| Turnover Due to Forecast Change | |
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| Turnover of Composite Forecasts | |
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| Information Horizon and Lagged Forecasts | |
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| Optimal Alpha Model Under Turnover Constraints | |
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| Small Trades and Turnover | |
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| Problems | |
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| Reduction in Alpha Exposure | |
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| References | |
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| Endnotes | |
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| Advanced Alpha Modeling Techniques | |
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| The Return-Generating Equation | |
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| Contextual Modeling | |
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| Mathematical Analysis of Contextual Modeling | |
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| Empirical Examination of Contextual Approach | |
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| Performance of Contextual Models | |
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| Sector vs. Contextual Modeling | |
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| Modeling Nonlinear Effects | |
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| Summary | |
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| Problems | |
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| Model Distance Test | |
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| References | |
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| Factor Timing Models | |
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| Calendar Effect: Behavioral Reasons | |
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| Calendar Effect Empirical Results | |
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| Seasonal Effect of Earnings Announcement | |
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| Macro Timing Models | |
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| Summary | |
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| References | |
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| Endnotes | |
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| Portfolio Constraints and Information Ratio | |
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| Sector Neutral Constraint | |
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| Long/Short Ratio of an Unconstrained Portfolio | |
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| Long-Only Portfolios | |
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| The Information Ratio of Long-Only and Long-Short Portfolios | |
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| Problems | |
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| Mean-Variance Optimization with Range Constraints | |
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| References | |
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| Endnotes | |
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| Transaction Costs and Portfolio Implementation | |
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| Components of Transaction Costs | |
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| Optimal Portfolios with Transaction Costs: Single Asset | |
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| Optimal Portfolios with Transaction Costs: Multiassets | |
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| Portfolio Trading Strategies | |
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| Optimal Trading Strategies: Single Stock | |
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| Optimal Trading Strategies: Portfolios of Stocks | |
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| Problems | |
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| Calculus of Variation | |
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| References | |