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Equity Valuation and Portfolio Management

by: Fabozzi, Frank J.; Markowitz, Harry M.

Equity Valuation and Portfolio Management

by: Fabozzi, Frank J.; Markowitz, Harry M.

ISBN 13:
9780470929919
ISBN 10:
047092991X
Edition: 1st
Format: Hardcover
Copyright: 10/04/2011
Publisher: Wiley

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Summary

A detailed look at equity valuation and portfolio management Equity valuation is a method of valuing stock prices using fundamental analysis to determine the worth of the business and discover investment opportunities. In Equity Valuation and Portfolio Management Frank J. Fabozzi and Harry M. Markowitz explain the process of equity valuation, provide the necessary mathematical background, and discuss classic and new portfolio strategies for investment managers. Divided into two comprehensive parts, this reliable resource focuses on valuation and portfolio strategies related to equities. Discusses both fundamental and new techniques for valuation and strategies Fabozzi and Markowitz are experts in the fields of investment management and economics Includes end of chapter bullet point summaries, key chapter take-aways, and study questions Filled with in-depth insights and practical advice, Equity Valuation and Portfolio Management will put you in a better position to excel at this challenging endeavor.

Preace	p. xiii
About the Editors	p. xxiii
Contributing Authors	p. xxv
An Introduction to Quantitative Equity Investing	p. 1
Equity Investing	p. 1
Fundamental Vs. Quantitative Investor	p. 2
The Quantitative Stock Selection Model	p. 7
The Overall Quantitative-Investment Process	p. 9
Research	p. 9
Portfolio Construction	p. 18
Monitoring	p. 21
Current Trends	p. 22
Key Points	p. 23
Questions	p. 24
Equity Analysis Using Traditional and Value-Based Metrics	p. 25
Overview of Traditional Metrics	p. 25
Price Multiples	p. 32
Fundamental Stock Return	p. 36
Traditional Caveats	p. 38
Overview of Value-Based Metrics	p. 39
Key Points	p. 58
Appendix: Case Study	p. 60
Questions	p. 69
A Franchise Factor Approach to Modeling P/E Orbits	p. 71
Background	p. 72
Historical Data Observations	p. 75
Formulation of the Basic Model	p. 81
P/E Myopia: The Fallacy of a Stable P/E	p. 85
Two-Phase P/E Orbits	p. 91
Franchise Valuation under Q-Type Competition	p. 96
Franchise Labor	p. 91
Key Points	p. 101
Questions	p. 102
Relative valuation Methods for Equity Analysis
Basic Principles of Relative Valuation	p. 106
Hypothetical Example	p. 115
Key Points	p. 123
Questions	p. 124
Valuation over the Cycle and the Distribution of Returns	p. 125
The Link Between Earnings and Returns	p. 126
The Phases Can Be Interpreted in Relationship to the Economy	p. 132
Asset Class Performance Varies across the Phases	p. 137
Incorporating Cyclically into Valuations	p. 139
Appendix Dates and Returns of the Phases	p. 142
Key Points	p. 146
Questions	p. 146
An Architecture for Equity Portfolio Management	p. 147
Architectural Building Blocks	p. 148
Traditional Active Management	p. 151
Passive Management	p. 156
Engineered Management	p. 157
Expanding Opportunities	p. 160
The Risk-Return Continuum	p. 163
The Ultimate Objective	p. 167
Key Points	p. 168
Questions	p. 169
Equity Analysis in a Complex Market	p. 171
An Integrated Approach to a Segmented, Market	p. 172
Disentangling	p. 176
Constructing, Trading, and Evaluating Portfolios	p. 184
Profiting from Complexity	p. 186
Key Points Questions
Survey Studies of the Use of Quantitative Equity Management	p. 189
2003 Intertek European Study	p. 189
2006 Intertek Study	p. 197
2007 Intertek Study	p. 205
Challenges for Quantitative Equity Investing	p. 224
Modeling After the 2007-2009 Global Financial Crisis	p. 226
Key Points	p. 228
Questions	p. 229
Implementable Quantitative Equity Research	p. 231
The Rise of Econophysics	p. 233
A General Framework	p. 235
Select a Sample Free from Survivorship Bias	p. 238
Select a Methodology to Estimate the Model	p. 239
Risk Control	p. 246
Key Points	p. 248
Questions	p. 249
Tracking Error and Common Stock Portfolio Management	p. 251
Definition of Tracking Error	p. 251
Components of Tracking Error	p. 254
Forward-Looking vs. Backward-Looking Tracking Error	p. 255
Information Ratio	p. 256
Determinants of Tracking Error	p. 257
Marginal Contribution to Tracking Error	p. 261
Key Points	p. 262
Questions	p. 263
Factor-Based Equity Portfolio Construction and Analysis	p. 265
Factor-Based Trading	p. 266
Developing Factor-Based Trading Strategies	p. 269
Risk to Trading Strategies	p. 271
Desirable Properties of Factors	p. 273
Sources for Factors	p. 273
Building Factors from Company Characteristics	p. 274
Working with Data	p. 275
Analysis of Factor Data	p. 283
Key Points	p. 287
Questions	p. 289
Cross-Sectional Factor-Based Models and Trading Strategies	p. 291
Cross-Sectional Methods for Evaluation of Factor Premiums	p. 292
Factor Models	p. 300
Performance Evaluation of Factors	p. 310
Model Construction Methodologies for a Factor-based Trading Strategy	p. 317
Backtesting	p. 328
Backtesting Our Factor Trading Strategy	p. 330
Key Points	p. 331
Appendix: The Compustat Point-in-Time, IBES Consensus Databases and Factor Definitions	p. 333
Questions	p. 337
Multifactor Equity Risk Models and Their Applications	p. 339
Motivation	p. 340
Equity Risk Factor Models	p. 342
Applications of Equity Risk Models	p. 350
Key Points	p. 370
Questions	p. 371
Dynamic Factor Approaches to Equity Portfolio Management	p. 373
Methods of Active Management	p. 376
Modeling	p. 385
Implementation	p. 392
Key Points	p. 395
Questions	p. 395
A Factor Competition Approach to Stock Selection	p. 397
The Problem	p. 397
The Solution	p. 403
Which Factors Get Picked?	p. 407
Does the Alpha Repair Process Work?	p. 408
Key Points	p. 411
Questions	p. 412
Avoiding Unintended Country Bets in Global Equity Portfolios	p. 413
Country Membership and Individual Stock Returns	p. 414
Ways to Build Active Global Portfolio	p. 416
Studying the Naive Portfolio	p. 419
Empirical Results	p. 420
Why Does the Naive Stock Selection Portfolio Make Country Noise Bets?	p. 422
Key Points	p. 423
Questions	p. 424
Modeling Market Impact Costs	p. 425
Market Impact Costs	p. 426
Liquidity and Transaction Costs	p. 427
Market Impact Measurements and Empirical Findings	p. 430
Forecasting and Modeling Market Impact	p. 433
Key Points	p. 439
Questions	p. 440
Equity Portfolio Selection in Practice	p. 441
Portfolio Constraints Commonly Used in Practice	p. 442
Benchmark Exposure and Tracking Error Minimization	p. 450
Incorporating Transaction Costs	p. 454
Incorporating Taxes	p. 460
Multi-Account Optimization	p. 465
Robust Parameter Estimation	p. 469
Portfolio Resampling	p. 471
Robust Portfolio Optimization	p. 474
Key Points	p. 480
Questions	p. 481
Portfolio Construction and Extreme Risk	p. 483
Measures of Extreme Loss	p. 484
Constraining Shortfall	p. 485
Performance	p. 485
Imposing Benchmark Neutrality	p. 487
Analysis	p. 489
Key Points	p. 493
Appendix: Constructing Out-of-Sample Shortfall Betas	p. 494
Questions	p. 495
Working with High-Frequency Data	p. 497
What is High-Frequency Data?	p. 497
How is High-Frequency Data Recorded?	p. 499
Properties of High-Frequency Data	p. 500
High-Frequency Data are Voluminous	p. 501
High-Frequency Data are Subject to Bid-Ask Bource	p. 503
High-Frequency Data; are Irregularly! Spaced in Time	p. 509
Equity Correlations Decay at High Frequencies	p. 517
Key Points	p. 519
Questions	p. 520
Statistical Arbitrage	p. 521
Pairs Trading	p. 523
General Models	p. 532
Key Points	p. 534
Questions	p. 534
About the Website	p. 535
Index	p. 537
Table of Contents provided by Ingram. All Rights Reserved.

Amazon no longer offers textbook rentals. We do!

Equity Valuation and Portfolio Management

Equity Valuation and Portfolio Management

9780470929919

047092991X

Summary

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Table of Contents

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