We also presented a training course version of the book, called "How to Research Active This talk provided many opportunities to gauge understanding and confusion over these basic ideas. Distinguishing skill from luck is difficult. Implementation should subtract as little value as possible.ħ. Why Datamining is Easy, and guidelines to avoid it.Ħ. Alphas must control for volatility, skill, and expectations: Alpha = Volatility ĥ. The Fundamental Law of Active Management:Ĥ.
The Information Ratio (IR) is the Key to Value-Added.ģ. Active Management is Forecasting: consensus views lead to the benchmark.Ģ.
First, we presented a talk summarizing theīook at several investment management conferences.1 "Seven Quantitative Insights into Activeġ. We received feedback on how clearly we hadĬonveyed certain ideas through at least two channels. Third, we have tried to clarify certain discussions. Chapter 3 includes empiricalĭistributions of asset level risk statistics. Chapter 5 now includes empirical distributions of these statistics.Ĭhapter 15 provides similar empirical results for long/short portfolios. 3.Īt the more detailed level, readers have wanted more information on typical numbers for We have also added empirical evidenceĪbout the accuracy of risk models, in Chap. Record for Active Management, provides some answers. General level: how do we know this entire methodology works? Chapter 20, on The Historical Second, we receive exhortations to add more empirical evidence, where appropriate. Some previously existing chapters also cover new material. 18), The Historical Record for Active Management (Chap. New chapters coverĪdvanced Forecasting (Chap. The long answer is that we have tried to improve Active Portfolio Management along exactly theseįirst, we have added significant amounts of new material in the second edition. Add empirical evidence where appropriate. Practicing or aspiring quantitatively oriented investment manager, and the shelves of manyīut while our readers have clearly valued the book, they have also challenged us to improve it.Ĭover mo re topics of relevance to today. The book seems to be on the shelf of every Management's reception in the investment community. We have been extremely gratified by Active Portfolio Why a second edition? Why take time from busy lives? Why devote the energy to improving anĮxisting text rather than writing an entirely new one? Why toy with success? The Historical Record for Active Management Transactions Costs, Turnover, and Trading Residual Risk and Return: The Information RatioĮxpected Returns and the Arbitrage Pricing Theory Read that, and be happier.Ī Quantitative Approach for Providing Superior Returns and Controlling RiskĬonsensus Expected Returns: The Capital Asset Pricing ModelĮxceptional Return, Benchmarks, and Value Added Everything G&K had to say about market impact was either trivial or wrong, but they did refer to the very important paper of Almgren and Chriss.
I can say that this is the second finance book I read (the first being an older edition of Hull's Options, Futures & Other Derivatives with Derivagem CD Value Package (includes Student Solutions Manual for Options, Futuresd Other Derivatives) (7th Edition), since my first finance project was developing a market impact model. Not being one of these, I cannot tell if the book is useful for them. Since everyone has a calculator with a ln button, and quantitatively inclined people can compute logs pretty quickly in their heads, this is an indication that the book is targeted to mathematically unsophisticated people.
Ln(1+x) = x (there is nothing bizarre about the approximation, but the use of the logarithm gives much simpler derivations of much more widely applicable results). A tell: the authors use the bizarre approximation It seems pretty clear that the book is also written FOR the idiots, er, I mean, MBAs who manage mutual funds and pension funds. As many other reviewers have indicated, this book is verbose and poorly organized, and clearly not written by people trained in mathematics.