Quantitative equity portfolio management: modern techniques and applications

Table of Contents
INTRODUCTION: BELIEFS, RISK, PROCESS
Beliefs
Risks
Quantitative Investment Process

PORTFOLIO THEORY
Distributions of Investment Returns
Optimal Portfolios
Capital Asset Pricing Model (CAPM)
Characteristic Portfolios

RISK MODELS AND RISK ANALYSIS
Arbitrage Pricing Theory and APT models
Risk Analysis
Contribution to Value at Risk

EVALUATION OF ALPHA FACTORS
Alpha Performance Benchmarks-The Ratios
Single Period Skill: Information Coefficient
Multi-Period Ex Ante Information Rati


Empirical Examples

QUANTITATIVE FACTORS
Value Factors
Quality Factors
Momentum Factors

VALUATION TECHNIQUES AND VALUE CREATION Valuation Framework
Free Cash Flow
Modeling Business Economics of a Firm
Cost of Capital
Explicit Period, Fade Period, and Terminal Value
Multi-Path Discounted Cash Flow Analysis

MULTI-FACTOR ALPHA MODELS
Single-Period Composite IC of a Multi-Factor Model
Optimal Alpha Model-An Analytical Derivation
Factor Correlation versus IC Correlation
Composite Alpha Model with Orthogonalized Factors
Fama-Macbeth Regression and Optimal Alpha Model

PORTFOLIO TURNOVER AND OPTIMAL ALPHA MODEL
Turnover of Fixed-Weight Portfolios
Turnover Due to Forecast Change
Turnover of Composite Forecasts
Information Horizon and Lagged Forecasts
Optimal Alpha Model under Turnover Constraint
Small Trades and Turnover

ADVANCED ALPHA MODELING TECHNIQUES
Contextual Modeling
Mathematical Analysis of Contextual Modeling
Empirical Examination of Contextual Approach
Sector versus Contextual Modeling
Modeling Nonlinear Effects

FACTOR TIMING MODELS
Calendar Effect-Behavioral Reasons
Calendar Effect-Empirical Results
The Earning Season Effect
Macro Timing Models

PORTFOLIO CONSTRAINTS AND INFORMATION RATIO
Sector Neutral Constraint
Long-Short Ration of Unconstrained Portfoli

Long-Only Portfolios
The IR of Long-Only and Long-Short Portfolios

TRANSACTION COSTS & PORTFOLIO IMPLEMENTATION
Components of Transaction Costs
Optimal Portfolios with Transaction Costs-Single Asset
Optimal Portfolios with Transaction Costs-Multi Asset
Portfolio Trading Strategies
Optimal Trading Horizon
Optimal Trading Strategies-Portfolios of Stocks

Quantitative equity portfolio management combines theories and advanced techniques from several disciplines, including financial economics, accounting, mathematics, and operational research. While many texts are devoted to these disciplines, few deal with quantitative equity investing in a systematic and mathematical framework that is suitable for quantitative investment students. Providing a solid foundation in the subject, Quantitative Equity Portfolio Management: Modern Techniques and Applications presents a self-contained overview and a detailed mathematical treatment of various topics.