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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 | |