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

Dr Bernd Scherer is Managing Director and Global Head of Quantitative GTAA Products at Morgan Stanley Investment Management, where he is responsible for the creation of active investment strategies within commodities, foreign exchange, credit and equity markets. Before joining Morgan Stanley he has been Head of Quantitative Research and Head of Portfolio Engineering at Deutsche Asset Management in New York. During his 14-year career in asset management he has held various positions at Morgan Stanley, Oppenheim Investment Management Schroders and JP Morgan Investment Management. Dr Scherer's current research interests focus on signal construction, asset pricing and portfolio optimisation. He has written four books and more than 40 publications in the Journal of Portfolio Management, Financial Analysts Journal, Journal of Investment Management, Risk, Financial Markets and Portfolio Management, Journal of Asset Management etc. Bernd is visiting professor at Birkbeck College and external advisor to the Swiss Finance Institute.