Оглавление
William Kinlaw. Asset Allocation
Table of Contents
List of Tables
List of Illustrations
Guide
Pages
Praise for the first edition: “A Practitioner’s Guide to Asset Allocation”
Asset Allocation. From Theory to Practice and Beyond
Foreword to the First Edition
Preface
Key Takeaways. Chapter 1: What Is an Asset Class?
Chapter 2: Fundamentals of Asset Allocation
Chapter 3: The Importance of Asset Allocation
Chapter 4: Time Diversification
Chapter 5: Divergence
Chapter 6: Correlation Asymmetry
Chapter 7: Error Maximization
Chapter 8: Factors
Chapter 9: 1/N
Chapter 10: Policy Portfolios
Chapter 11: The Private Equity Leverage Myth
Chapter 12: Necessary Conditions for Mean-Variance Analysis
Chapter 13: Forecasting
Chapter 14: The Stock–Bond Correlation
Chapter 15: Constraints
Chapter 16: Asset Allocation Versus Factor Investing
Chapter 17: Illiquidity
Chapter 18: Currency Risk
Chapter 19: Estimation Error
Chapter 20: Leverage Versus Concentration
Chapter 21: Rebalancing
Chapter 22: Regime Shifts
Chapter 23: Scenario Analysis
Chapter 24: Stress Testing
CHAPTER 1 What Is an Asset Class?
STABLE AGGREGATION
Investable
INTERNALLY HOMOGENEOUS
EXTERNALLY HETEROGENEOUS
EXPECTED UTILITY
SELECTION SKILL
COST-EFFECTIVE ACCESS
POTENTIAL ASSET CLASSES
REFERENCES
NOTES
CHAPTER 2 Fundamentals of Asset Allocation. THE FOUNDATION: PORTFOLIO THEORY. E-V Maxim
Expected Return
Risk
Efficient Frontier
The Optimal Portfolio
PRACTICAL IMPLEMENTATION
Required Conditions
Asset Classes
Estimating Expected Returns
Estimating Standard Deviations and Correlations
Efficient Portfolios
Matrix Inversion
THE SHARPE ALGORITHM
The Optimal Portfolio
REFERENCES
NOTES
CHAPTER 3 The Importance of Asset Allocation. FALLACY: ASSET ALLOCATION DETERMINES MORE THAN 90% OF PERFORMANCE
THE DETERMINANTS OF PORTFOLIO PERFORMANCE
Fundamental Flaw
A Practical View on Importance
Reductio ad Absurdum
THE BEHAVIORAL BIAS OF POSITIVE ECONOMICS
Determining Relative Importance Analytically
Determining Relative Importance by Simulation
THE SAMUELSON DICTUM
THE BOTTOM LINE
RELATED TOPICS
REFERENCES
NOTES
CHAPTER 4 Time Diversification. FALLACY: TIME DIVERSIFIES RISK
SAMUELSON'S BET
TIME, VOLATILITY, AND PROBABILITY OF LOSS
TIME AND EXPECTED UTILITY
WITHIN-HORIZON RISK
A PREFERENCE-FREE CONTRADICTION TO TIME DIVERSIFICATION
THE BOTTOM LINE
RELATED TOPICS
REFERENCES
NOTES
CHAPTER 5 Divergence. FALLACY: VOLATILITY SCALES WITH THE SQUARE ROOT OF TIME, AND CORRELATION IS CONSTANT ACROSS RETURN INTERVALS
EXCESS DISPERSION
THE EVIDENCE
THE INTUITION
THE MATH
IMPLICATIONS
Risk Measurement
Portfolio Construction
Performance Measurement
THE BOTTOM LINE
RELATED TOPICS
REFERENCES
NOTES
CHAPTER 6 Correlation Asymmetry. FALLACY: DIVERSIFICATION IS SYMMETRIC
CORRELATION MATHEMATICS
CORRELATION ASYMMETRY BETWEEN ASSET CLASSES
IMPLICATIONS FOR PORTFOLIO CONSTRUCTION
THE BOTTOM LINE
RELATED TOPICS
REFERENCES
NOTES
CHAPTER 7 Error Maximization. FALLACY: OPTIMIZED PORTFOLIOS ARE HYPERSENSITIVE TO INPUT ERRORS
THE INTUITIVE ARGUMENT
THE EMPIRICAL ARGUMENT. Country Allocation
Asset Allocation
THE ANALYTICAL ARGUMENT
THE BOTTOM LINE
RELATED TOPICS
REFERENCES
NOTES
CHAPTER 8 Factors. FALLACY: FACTORS OFFER SUPERIOR DIVERSIFICATION AND NOISE REDUCTION
WHAT IS A FACTOR?
EQUIVALENCE OF ASSET CLASS AND FACTOR DIVERSIFICATION
NOISE REDUCTION
THE BOTTOM LINE
RELATED TOPICS
REFERENCES
NOTES
CHAPTER 9 1/N. FALLACY: EQUALLY WEIGHTED PORTFOLIOS ARE SUPERIOR TO OPTIMIZED PORTFOLIOS
THE CASE FOR 1/N
SETTING THE RECORD STRAIGHT
EMPIRICAL EVIDENCE IN DEFENSE OF OPTIMIZATION
PRACTICAL PROBLEMS WITH 1/N
BROKEN CLOCK
THE BOTTOM LINE
RELATED TOPICS
REFERENCES
NOTE
CHAPTER 10 Policy Portfolios. FALLACY: POLICY PORTFOLIOS MATTER
RISK INSTABILITY
WHAT INVESTORS WANT
RESPONDING TO RISK REGIMES
THE BOTTOM LINE
RELATED TOPICS
REFERENCE
CHAPTER 11 The Private Equity Leverage Myth. FALLACY: PRIVATE EQUITY VOLATILITY SCALES WITH ITS LEVERAGE
THE PRIVATE EQUITY LEVERAGE PUZZLE
LEVERAGE AND VOLATILITY IN THE PUBLIC EQUITY MARKET
Controlling for Fundamental Risk
Regressions with Additional Controls
Anecdotal Evidence
THE BOTTOM LINE
RELATED TOPICS
REFERENCES
NOTES
CHAPTER 12 Necessary Conditions for Mean-Variance Analysis. THE CHALLENGE
DEPARTURES FROM ELLIPTICAL DISTRIBUTIONS
Skewness
Asset-Specific Tail Distributions
Nonlinear Asset Dependencies
DEPARTURES FROM QUADRATIC UTILITY
Kinked Utility Function
S-Shaped Utility Function
FULL-SCALE OPTIMIZATION
THE CURSE OF DIMENSIONALITY
APPLYING FULL-SCALE OPTIMIZATION
THE BOTTOM LINE
RELATED TOPICS
REFERENCES
NOTES
CHAPTER 13 Forecasting. THE CHALLENGE
CONVENTIONAL LINEAR REGRESSION
REGRESSION REVISITED
How Many Anecdotes Do We Need?
PARTIAL SAMPLE REGRESSION
Comparison to Other Approaches
Predicting Returns of Factors and Asset Classes
THE BOTTOM LINE
RELATED TOPICS
REFERENCES
NOTE
CHAPTER 14 The Stock–Bond Correlation. THE CHALLENGE
SINGLE-PERIOD CORRELATION
FUNDAMENTAL PREDICTORS OF THE STOCK–BOND CORRELATION
Fundamental Factors
MODEL SPECIFICATION
Model 1: Naïve Extrapolation of Trailing Correlation
Model 2: Regression on Trailing Correlation
Model 3: Regression on Fundamental Factors
Model 4: Regression on Fundamental Factors Filtered for Relevance
Model 5: Regression on the Path of Fundamental Factors Filtered for Relevance
MODEL RESULTS
THE BOTTOM LINE
RELATED TOPICS
REFERENCES
NOTES
CHAPTER 15 Constraints. THE CHALLENGE
WRONG AND ALONE
MEAN-VARIANCE-TRACKING ERROR OPTIMIZATION
Efficient Surface
Iso-Expected Return Curve
THE BOTTOM LINE
REFERENCE
NOTE
CHAPTER 16 Asset Allocation Versus Factor Investing. THE CHALLENGE
PORTFOLIO CONSTRUCTION. Markowitz Objective Function
Augmented Objective Function
Macroeconomic Variables Versus Market Variables
CASE STUDY
THE BOTTOM LINE
RELATED TOPICS
REFERENCES
NOTES
CHAPTER 17 Illiquidity. THE CHALLENGE
SHADOW ASSETS AND LIABILITIES
EXPECTED RETURN AND RISK OF SHADOW ALLOCATIONS
Tactical Asset Allocation
Portfolio Rebalancing
Cash Demands
OTHER CONSIDERATIONS
Performance Fees
Valuation
Absolute Versus Partial Illiquidity
CASE STUDY
Tactical Asset Allocation
Rebalancing
Cash Demands
THE BOTTOM LINE
RELATED TOPICS
APPENDIX. Performance Fee Adjustment
De-smoothing Adjustment
REFERENCES
NOTES
CHAPTER 18 Currency Risk. THE CHALLENGE
WHY HEDGE?
WHY NOT HEDGE EVERYTHING?
LINEAR HEDGING STRATEGIES
NONLINEAR HEDGING STRATEGIES
THE BOTTOM LINE
RELATED TOPICS
REFERENCES
NOTES
CHAPTER 19 Estimation Error. THE CHALLENGE
TRADITIONAL APPROACHES TO ESTIMATION ERROR
Bayesian Shrinkage
Resampling
Robust Optimization
STABILITY-ADJUSTED OPTIMIZATION
Types of Estimation Error
Small-Sample Error
Independent-Sample Error
Interval Error
Mapping Error
Composite Instability
Empirical Analysis of Asset Class Errors
BUILDING A STABILITY-ADJUSTED RETURN DISTRIBUTION
DETERMINING THE OPTIMAL ALLOCATION
EMPIRICAL ANALYSIS
THE BOTTOM LINE
RELATED TOPICS
REFERENCES
NOTES
CHAPTER 20 Leverage Versus Concentration. THE CHALLENGE
LEVERAGE IN THEORY
LEVERAGE IN PRACTICE
THE BOTTOM LINE
RELATED TOPICS
REFERENCES
NOTES
CHAPTER 21 Rebalancing. THE CHALLENGE
THE DYNAMIC PROGRAMMING SOLUTION
THE MVD HEURISTIC
THE BOTTOM LINE
RELATED TOPICS
REFERENCES
NOTES
CHAPTER 22 Regime Shifts. THE CHALLENGE
PREDICTABILITY OF RETURN AND RISK
REGIME-SENSITIVE ALLOCATION
Financial Turbulence
Portfolio Construction with Conditional Risk Estimates
TACTICAL ASSET ALLOCATION
Identifying a Predictive Signal
Detecting Regimes: Hidden Markov Models
Testing Out-of-Sample
THE BOTTOM LINE
APPENDIX: BAUM–WELCH ALGORITHM
RELATED TOPICS
REFERENCES
NOTES
CHAPTER 23 Scenario Analysis. THE CHALLENGE
COMPARISON TO MEAN-VARIANCE ANALYSIS
THE MAHALANOBIS DISTANCE APPLIED TO SCENARIO ANALYSIS
Persistence Versus Mean Reversion
Point in Time Versus Paths
THE MAHALANOBIS DISTANCE AND PROBABILITY
REVISING PROBABILITIES
CASE STUDY
MAPPING ECONOMIC VARIABLES ONTO ASSET CLASS RETURNS
THE BOTTOM LINE
RELATED TOPICS
REFERENCES
NOTES
CHAPTER 24 Stress Testing. THE CHALLENGE
END-OF-HORIZON EXPOSURE TO LOSS. Probability of Loss
Value at Risk
WITHIN-HORIZON EXPOSURE TO LOSS. Within-Horizon Probability of Loss
Within-Horizon Value at Risk
REGIMES
Full-Sample Versus Regime-Dependent Exposure to Loss
THE BOTTOM LINE
RELATED TOPICS
REFERENCES
NOTES
CHAPTER 25 Statistical and Theoretical Concepts
DISCRETE AND CONTINUOUS RETURNS
ARITHMETIC AND GEOMETRIC AVERAGE RETURNS
STANDARD DEVIATION
CORRELATION
COVARIANCE
COVARIANCE INVERTIBILITY
MAXIMUM LIKELIHOOD ESTIMATION
MAPPING HIGH-FREQUENCY STATISTICS ONTO LOW-FREQUENCY STATISTICS
PORTFOLIOS
PROBABILITY DISTRIBUTIONS
THE CENTRAL LIMIT THEOREM
THE NORMAL DISTRIBUTION
HIGHER MOMENTS
THE LOGNORMAL DISTRIBUTION
ELLIPTICAL DISTRIBUTIONS
THE MAHALANOBIS DISTANCE
PROBABILITY OF LOSS
VALUE AT RISK
UTILITY THEORY
SAMPLE UTILITY FUNCTIONS
ALTERNATIVE UTILITY FUNCTIONS
EXPECTED UTILITY
CERTAINTY EQUIVALENTS
MEAN-VARIANCE ANALYSIS FOR MORE THAN TWO ASSETS
EQUIVALENCE OF MEAN-VARIANCE ANALYSIS AND EXPECTED UTILITY MAXIMIZATION
MONTE CARLO SIMULATION
BOOTSTRAP SIMULATION
REFERENCES
NOTES
Glossary of Terms
Index
WILEY END USER LICENSE AGREEMENT
