Quantitative Investment Analysis

Name: Quantitative Investment Analysis
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ISBN: 9780470052204

ISBN-10: 0470052201

ISBN-13: 9780470052204

Edition: 2nd 2007 (Revised)

Authors: Dennis W. McLeavey, Jerald E. Pinto, David E. Runkle, Richard A. DeFusco, Mark J. P. Anson

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Description:

This edition is a guide to applying quantitative analysis to the investment process. Examples and problems are investment-oriented and reflect the changes currently taking place in the global investment community.

Book details

List price: $100.00
Edition: 2nd
Copyright year: 2007
Publisher: John Wiley & Sons, Incorporated
Publication date: 1/22/2007
Binding: Hardcover
Pages: 600
Size: 7.50" wide x 10.25" long x 1.25" tall
Weight: 2.640
Language: English

RICHARD A. DeFUSCO, CFA, is an Associate Professor of Finance at the University of Nebraska-Lincoln. DeFusco completed his bachelor's degree in management science at the University of Rhode Island and doctoral degree in finance at the University of Tennessee-Knoxville. He earned his CFA charter in 1999.DENNIS W. McLEAVEY, CFA, is Head of Professional Development Products at CFA Institute. McLeavey completed a doctorate in production management and industrial engineering at Indiana University in 1972, and earned his CFA charter in 1990.JERALD E. PINTO, CFA, is Director in the CFA and CIPM Programs Division at CFA Institute. Before coming to CFA Institute in 2002, he consulted in investment…

RICHARD A. DEFUSCO, CFA, is an Associate Professor of Finance at the University of Nebraska-Lincoln (UNL). He earned his CFA charter in 1999. DeFusco is a member of the Omaha-Lincoln Society of Financial Analysts, and completed his bachelor's degree in management science at the University of Rhode Island and doctoral degree in finance at the University of Tennessee-Knoxville.DENNIS W. MCLEAVEY, CFA, is Head of Professional Development Products at CFA Institute. During his twenty-five year academic career, he has taught at The University of Western Ontario, the University of Connecticut, the University of Rhode Island (where he founded a student-managed fund), and Babson College. McLeavey…



Foreword


Acknowledgments


Introduction



The Time Value of Money



Introduction



Interest Rates: Interpretation



The Future Value of a Single Cash Flow



The Frequency of Compounding



Continuous Compounding



Stated and Effective Rates



The Future Value of a Series of Cash Flows



Equal Cash Flows-Ordinary Annuity



Unequal Cash Flows



The Present Value of a Single Cash Flow



Finding the Present Value of a Single Cash Flow



The Frequency of Compounding



The Present Value of a Series of Cash Flows



The Present Value of a Series of Equal Cash Flows



The Present Value of an Infinite Series of Equal Cash Flows-Perpetuity



Present Values Indexed at Times Other Than t = 0



The Present Value of a Series of Unequal Cash Flows



Solving for Rates, Number of Periods, or Size of Annuity Payments



Solving for Interest Rates and Growth Rates



Solving for the Number of Periods



Solving for the Size of Annuity Payments



Review of Present and Future Value Equivalence



The Cash Flow Additivity Principle



Discounted Cash Flow Applications



Introduction



Net Present Value and Internal Rate of Return



Net Present Value and the Net Present Value Rule



The Internal Rate of Return and the Internal Rate of Return Rule



Problems with the IRR Rule



Portfolio Return Measurement



Money-Weighted Rate of Return



Time-Weighted Rate of Return



Money Market Yields



Statistical Concepts and Market Returns



Introduction



Some Fundamental Concepts



The Nature of Statistics



Populations and Samples



Measurement Scales



Summarizing Data Using Frequency Distributions



The Graphic Presentation of Data



The Histogram



The Frequency Polygon and the Cumulative Frequency Distribution



Measures of Central Tendency



The Arithmetic Mean



The Median



The Mode



Other Concepts of Mean



Other Measures of Location: Quantiles



Quartiles, Quintiles, Deciles, and Percentiles



Quantiles in Investment Practice



Measures of Dispersion



The Range



The Mean Absolute Deviation



Population Variance and Population Standard Deviation



Sample Variance and Sample Standard Deviation



Semivariance, Semideviation, and Related Concepts



Chebyshev's Inequality



Coefficient of Variation



The Sharpe Ratio



Symmetry and Skewness in Return Distributions



Kurtosis in Return Distributions



Using Geometric and Arithmetic Means



Probability Concepts



Introduction



Probability, Expected Value, and Variance



Portfolio Expected Return and Variance of Return



Topics in Probability



Bayes' Formula



Principles of Counting



Common Probability Distributions



Introduction



Discrete Random Variables



The Discrete Uniform Distribution



The Binomial Distribution



Continuous Random Variables



Continuous Uniform Distribution



The Normal Distribution



Applications of the Normal Distribution



The Lognormal Distribution



Monte Carlo Simulation



Sampling and Estimation



Introduction



Sampling



Simple Random Sampling



Stratified Random Sampling



Time-Series and Cross-Sectional Data



Distribution of the Sample Mean



The Central Limit Theorem



Point and Interval Estimates of the Population Mean



Point Estimators



Confidence Intervals for the Population Mean



Selection of Sample Size



More on Sampling



Data-Mining Bias



Sample Selection Bias



Look-Ahead Bias



Time-Period Bias



Hypothesis Testing



Introduction



Hypothesis Testing



Hypothesis Tests Concerning the Mean



Tests Concerning a Single Mean



Tests Concerning Differences between Means



Tests Concerning Mean Differences



Hypothesis Tests Concerning Variance



Tests Concerning a Single Variance



Tests Concerning the Equality (Inequality) of Two Variances



Other Issues: Nonparametric Inference



Tests Concerning Correlation: The Spearman Rank Correlation Coefficient



Nonparametric Inference: Summary



Correlation and Regression



Introduction



Correlation Analysis



Scatter Plots



Correlation Analysis



Calculating and Interpreting the Correlation Coefficient



Limitations of Correlation Analysis



Uses of Correlation Analysis



Testing the Significance of the Correlation Coefficient



Linear Regression



Linear Regression with One Independent Variable



Assumptions of the Linear Regression Model



The Standard Error of Estimate



The Coefficient of Determination



Hypothesis Testing



Analysis of Variance in a Regression with One Independent Variable



Prediction Intervals



Limitations of Regression Analysis



Multiple Regression and Issues in Regression Analysis



Introduction



Multiple Linear Regression



Assumptions of the Multiple Linear Regression Model



Predicting the Dependent Variable in a Multiple Regression Model



Testing Whether All Population Regression Coefficients Equal Zero



Adjusted R[superscript 2]



Using Dummy Variables in Regressions



Violations of Regression Assumptions



Heteroskedasticity



Serial Correlation



Multicollinearity



Heteroskedasticity, Serial Correlation, Multicollinearity: Summarizing the Issues



Model Specification and Errors in Specification



Principles of Model Specification



Misspecified Functional Form



Time-Series Misspecification (Independent Variables Correlated with Errors)



Other Types of Time-Series Misspecification



Models with Qualitative Dependent Variables



Time-Series Analysis



Introduction



Challenges of Working with Time Series



Trend Models



Linear Trend Models



Log-Linear Trend Models



Trend Models and Testing for Correlated Errors



Autoregressive (AR) Time-Series Models



Covariance-Stationary Series



Detecting Serially Correlated Errors in an Autoregressive Model



Mean Reversion



Multiperiod Forecasts and the Chain Rule of Forecasting



Comparing Forecast Model Performance



Instability of Regression Coefficients



Random Walks and Unit Roots



Random Walks



The Unit Root Test of Nonstationarity



Moving-Average Time-Series Models



Smoothing Past Values with an n-Period Moving Average



Moving-Average Time-Series Models for Forecasting



Seasonality in Time-Series Models



Autoregressive Moving-Average Models



Autoregressive Conditional Heteroskedasticity Models



Regressions with More than One Time Series



Other Issues in Time Series



Suggested Steps in Time-Series Forecasting



Portfolio Concepts



Introduction



Mean-Variance Analysis



The Minimum-Variance Frontier and Related Concepts



Extension to the Three-Asset Case



Determining the Minimum-Variance Frontier for Many Assets



Diversification and Portfolio Size



Portfolio Choice with a Risk-Free Asset



The Capital Asset Pricing Model



Mean-Variance Portfolio Choice Rules: An Introduction



Practical Issues in Mean-Variance Analysis



Estimating Inputs for Mean-Variance Optimization



Instability in the Minimum-Variance Frontier



Multifactor Models



Factors and Types of Multifactor Models



The Structure of Macroeconomic Factor Models



Arbitrage Pricing Theory and the Factor Model



The Structure of Fundamental Factor Models



Multifactor Models in Current Practice



Applications



Concluding Remarks


Appendices


References


Glossary


About the CFA Program


About the Authors


Index