9780470610022

ActiveBeta Indexes : Capturing Systematic Sources of Active Equity Returns

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  • ISBN13:

    9780470610022

  • ISBN10:

    0470610026

  • Edition: 1st
  • Format: Hardcover
  • Copyright: 2010-03-08
  • Publisher: Wiley
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  • The New copy of this book will include any supplemental materials advertised. Please check the title of the book to determine if it should include any access cards, study guides, lab manuals, CDs, etc.

Summary

An informative guide to implementing innovative active beta strategiesActive Beta Strategies presents exciting new research that shows how above market returns, or alpha, can be achieved in a low-cost, transparent, risk-adjusted fashion through indices uncovering persistent excess returns that are typically attributed to active portfolio management.Developed by leading investment practitioners at Westpeak Global Advisors, Active Beta Strategies introduces active betas, explains the systematic sources of equity returns in short-term earnings and price momentum, examines long-term earnings expectations behaviors and value, and then decomposes momentum and value returns and explains how they persist. Examines how to achieve alpha-type returns at a low cost and in a transparent fashion Details a groundbreaking new index and presents new findings that could change the face of active portfolio management Explores the historical performance of active beta indicesPortfolio managers, asset managers, wealth advisors, pensions and endowments, and other institutional investors seeking to improve returns while reducing costs will find Active Beta Strategies a solution to their performance needs in these challenging times.

Author Biography

Khalid Ghayur is the CEO and CIO of Westpeak Global Advisors, LP. He was director of research policy, a member of the Global Executive Committee, and chairman of the Index Policy Committee at Morgan Stanley Capital International (MSCI) Barra. Prior to this, he was global head of quantitative research and strategy for HSBC Global Asset Management. He is a CFA charterholder, has served on the Board of Governors of the CFA Institute, and is a former trustee of the CFA Institute Research Foundation. He received an MBA in finance and international business from the École Nationale des Ponts et Chaussées and an MA and BA in economics from the University of Karachi.

Ronan G. Heaney is Director of Research at Westpeak. Before joining Westpeak, he was a software architect with Multum Information Services and a senior software developer at Swiss Bank Corp. He holds an MS in computer science from Purdue University and a BS in applied physics from Dublin City University, Ireland.

Stephen A. Komon is a Senior Portfolio Manager at Westpeak. Prior to this, he was vice president of foreign exchange and commodities at J.P. Morgan & Co., and he also held positions with UBS AG/Swiss Bank and Dean Witter Reynolds. He holds an MBA in finance and accounting from the University of Chicago Booth School of Business and a BS in commerce from the University of Virginia. He is also a CFA charterholder.

Stephen C. Platt is Director of Portfolio Management at Westpeak. Before joining Westpeak, he cofounded and was a senior vice president of Cordillera Asset Management. He holds a BS in finance from the University of Colorado Leeds School of Business and is a CFA charterholder.

Table of Contents

Forewordp. xi
Prefacep. xiii
Background
The Evolution of Market Indexes and Index Fundsp. 3
The Early Days of Indexingp. 3
The Inception of the Mutual Fund Industryp. 5
Enter Academiap. 6
The Advent of Index/Passive Mutual Fundsp. 7
Index Mutual Funds for the Publicp. 8
Conclusionp. 9
The Evolution of Equity Style Indexesp. 11
Empirical Challenges to Financial Theoriesp. 11
Theoretical Explanations of Anomaliesp. 13
Establishing Equity Stylesp. 14
Equity Style Index Methodologyp. 16
Pitfalls of Current Equity Style Indexesp. 17
Conclusionp. 17
ActiveBeta Conceptual Framework
Introducing Active Betasp. 21
Defining Active Betasp. 21
Identifying the Drivers of Equity Returnsp. 24
Verificationp. 26
Exploring the Behavior of Return Driversp. 28
Behavior of Short-Term Earnings Expectation and the Link with Price Momentump. 29
Analysis Methodologyp. 29
Relationships Studiedp. 31
Decomposing Momentum Returnsp. 48
Conclusionp. 51
Appendix: Regression Analysis and Correlation Coefficientp. 51
Behavior of Long-Term Earnings Expectation and the Link with Valuep. 53
Relationships Studiedp. 53
Investment Horizon of Value Strategiesp. 70
Implications for Stock Risk Premiump. 74
Decomposing Value Returnsp. 76
Conclusionp. 79
Pricing and Persistence of Systematic Sources of Active Equity Returnsp. 81
Pricing of the Systematic Sources of Active Equity Returnsp. 81
Persistence of the Systematic Sources of Active Equity Returnsp. 89
Momentum, Value, and Risk Aversionp. 94
ActiveBeta Framework: A Summary of Relationshipsp. 99
ActiveBeta Indexes
ActiveBeta Index Construction Methodologyp. 103
Investment Process Indexesp. 104
Objectives of Investment Process Indexesp. 105
Conflicting Objectivesp. 108
Transparency, Understanding, and Rationale of the ActiveBeta Momentum Indexp. 110
ActiveBeta Index Construction Processp. 110
Differences in Construction between ActiveBeta Indexes and Other Public Style Indexesp. 112
Achieving Objectivesp. 114
Conclusionp. 120
Appendix: ActiveBeta Index Construction Process Examplep. 120
Historical Performance of ActiveBeta Indexesp. 123
ActiveBeta Index Construction Process Overviewp. 123
ActiveBeta Index Performance: Highlightsp. 126
ActiveBeta Index Performance: Detailed Analysisp. 127
ActiveBeta Index Exposuresp. 149
Conclusionp. 153
ActiveBeta Index Applicationsp. 155
Style Investing: A New Frameworkp. 155
Performance Attribution: Decomposing Active Manager Returnsp. 160
Portfolio Structuring: Revisiting the Alpha-Beta Return Separationp. 164
Performance Benchmarkingp. 169
Research and Analysisp. 172
Investment Vehiclesp. 174
ActiveBeta Customizable Solutions
Alternative Solutions for Capturing Active Betasp. 179
ActiveBeta Custom Indexesp. 179
ActiveBeta Custom Solutionsp. 183
A Word on Traditional Active Managementp. 194
Conclusionp. 197
Concluding Remarksp. 199
Disclosuresp. 201
Bibliographyp. 203
About the Authorsp. 207
Indexp. 209
Table of Contents provided by Ingram. All Rights Reserved.

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