This revised third edition provides you with:

• key concepts and methods to implement quantitatively-driven portfolio construction;

• knowledge of satellite investing, estimation error heuristics, scenario optimisation, mean variance investing, Bayesian methods, budgeting active risk, non-normality and multiple manager allocation;

• practical applications and accessible problem-solving skills;

• quantitative analysis that is supported by extensive examples, tables and charts to help practitioners adopt the subject matter in their day-to-day work.

The new chapters bring you up-to-date information on portfolio optimisation, with differentiation of alpha and beta testing, covariance estimation, showing estimation error vs. model error and fundamental vs. statistical models.

This book is highly recommended for practitioners including portfolio managers, consultants, strategists, marketers and quantitative analysts. It would also give an edge to final year undergraduates and MBAs looking to expand their knowledge beyond the mean-variance based solutions commonly taught in business schools.

About the Author

Introduction

1 Traditional Portfolio Construction: Selected Issues

2 Incorporating Deviations from Normality: Lower Partial Moments

3 Portfolio Resampling and Estimation Error

4 Bayesian Analysis and Portfolio Choice

5 Scenario Optimisation

6 Portfolio Construction with Transaction Costs

7 Benchmark-Relative Optimisation

8 Core-Satellite Investing: Budgeting Active Manager Risk

Index

Bernd Scherer teaches finance at EDHEC Business School and is a member of EDHEC Risk. He is also on the management board of the London Quant Group. Before joining EDHEC he was managing director and global head of Quantitative Asset Allocation at Morgan Stanley Investment Management, where he was responsible for the creation of active investment strategies within commodities, foreign exchange, credit and volatility products. During his 16-year career in asset management he has held various senior positions at Morgan Stanley, Deutsche Bank, Oppenheim Investment Management and J P Morgan Investment Management. Bernd's current research interests focus on signal construction, portfolio optimisation and asset liability modelling. He has written six books and more than 50 publications in leading academic and practitioner journals, such as the Journal of Banking and Finance, Journal of Financial Markets, Journal of Economics and Statistics, Journal of Portfolio Management, Financial Analysts Journal, Journal of Investment Management, Risk, Financial Markets and Portfolio Management, Journal of Asset Management, etc. Bernd holds MBA and MSc degrees from the University of Augsburg and the University of London, as well as a PhD in finance from the University of Giessen.