9780470642078

Ben Graham Was a Quant : Raising the IQ of the Intelligent Investor

by
  • ISBN13:

    9780470642078

  • ISBN10:

    0470642076

  • Edition: 1st
  • Format: Hardcover
  • Copyright: 2011-04-05
  • Publisher: Wiley
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Summary

Innovative insights on creating models that will help you become a disciplined intelligent investorThe pioneer of value investing, Benjamin Graham, believed in a philosophy that continues to be followed by some of today's most successful investors, such as Warren Buffett. Part of this philosophy includes adhering to your stock selection process come "hell or high water" which, in his view, was one of the most important aspects of investing.So, if a quant designs and implements mathematical models for predicting stock or market movements, what better way to remain objective, then to invest using algorithms or the quantitative method? This is exactly what Ben Graham Was a Quant will show you how to do. Opening with a brief history of quantitative investing, this book quickly moves on to focus on the fundamental and financial factors used in selecting "Graham" stocks, demonstrate how to test these factors, and discuss how to combine them into a quantitative model. Reveals how to create custom screens based on Ben Graham's methods for security selection Addresses what it takes to find those factors most influential in forecasting stock returns Explores how to design models based on other styles and international strategiesIf you want to become a better investor, you need solid insights and the proper guidance. With Ben Graham Was a Quant, you'll receive this and much more, as you learn how to create quantitative models that follow in the footsteps of Graham's value philosophy.

Author Biography

Steven P. Greiner, Ph.D., has served as the senior quantitative strategist and portfolio manager for Allegiant Asset Management (now wholly owned by PNC Capital Advisors) and was a member of its Investment Committee. Prior to this, he was a senior quantitative strategist for large capitalization investments at Harris Investment Management. He has more than twenty years of quantitative and modeling experience. Currently, Dr. Greiner is the head of Risk Research for FactSet Research Systems. He received a BS in mathematics and chemistry from the University of Buffalo, an MS and PhD in physical chemistry from the University of Rochester, and attained postdoctoral experience from the Free University Berlin, Department of Physics.

Table of Contents

Prefacep. xi
Introduction: The Birth of the Quantp. 1
Characterizing the Quantp. 3
Active versus Passive Investingp. 6
Desperately Seeking Alphap. 11
The Beginnings of the Modern Alpha Erap. 16
Important History of Investment Managementp. 18
Methods of Alpha Searchingp. 20
Risky Businessp. 27
Experienced versus Exposed Riskp. 28
The Black Swan: A Minor ELE Event-Are Quants to Blame?p. 34
Active versus Passive Riskp. 38
Other Risk Measures: VAR, C-VAR, and ETLp. 49
Summaryp. 52
Beta Is Not "Sharpe" Enoughp. 55
Back to Betap. 64
Beta and Volatilityp. 65
The Way to a Better Beta: Introducing the g-Factorp. 67
Tracking Error: The Deviant Differential Measurerp. 75
Summaryp. 77
Mr. Graham, I Give You Intelligencep. 79
Fama-French Equationp. 81
The Graham Formulap. 89
Factors for Use in Quant Modelsp. 90
Momentum: Increasing Investor Interestp. 96
Volatility as a Factor in Alpha Modelsp. 113
Modeling Pitfalls and Perilsp. 123
Data Availability, Look-Ahead, and Survivorship Biasesp. 124
Building Models You Can Trustp. 127
Scenario, Out-of-Sample, and Shock Testingp. 131
Data Snooping and Miningp. 139
Statistical Significance and Other Fascinationsp. 140
Choosing an Investment Philosophyp. 148
Growth, Value, Qualityp. 149
Investment Consultant as Dutch Unclep. 152
Where Are the Relative Growth Managers?p. 154
Testing the Graham Crackers ... er, Factorsp. 159
The First Tests: Sortingp. 160
Time-Series Plotsp. 173
The Next Tests: Scenario Analysisp. 182
Building Models from Factorsp. 193
Surviving Factorsp. 194
Weighting the Factorsp. 197
The Art versus Science of Modelingp. 200
Time Series of Returnsp. 210
Other Conditional Informationp. 215
The Final Modelp. 217
Other Methods of Measuring Performance: Attribution Analysis via Brinson and Risk Decompositionp. 220
Regression of the Graham Factors with Forward Returnsp. 228
Building Portfolios from Modelsp. 233
The Deming Way: Benchmarking Your Portfoliop. 235
Portfolio Construction Issuesp. 247
Using an Online Broker: Fidelity, E*Trade, TD Ameritrade, Schwab, Interactive Brokers, and TradeStationp. 249
Working with a Professional Investment Management System: Bloomberg, Clarifi, and FactSetp. 251
Barguments: The Antidementia Bacteriump. 255
The Colossal Nonfailure of Asset Allocationp. 256
The Stock Market as a Class of Systemsp. 258
Stochastic Portfolio Theory: An Introductionp. 266
Portfolio Optimization: The Layman's Perspectivep. 276
Tax-Efficient Optimizationp. 282
Summaryp. 282
Past and Future Viewp. 285
Why Did Global Contagion and Meltdown Occur?p. 292
Fallout of Crisesp. 297
The Rise of the Multinational State-Owned Enterprisesp. 301
The Emerged Marketsp. 310
The Future Quantp. 311
Notesp. 317
Acknowledgmentsp. 325
About the Authorp. 327
Indexp. 329
Table of Contents provided by Ingram. All Rights Reserved.

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