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Table of Contents
Intro; Preface; Acknowledgments; Contents; About the Author; List of Figures; List of Tables; Part I: Foundations; 1: Introduction toAsset Allocation; 1.1 Asset Allocation andAsset Classes; 1.2 The Asset Allocation Process; 1.3 Strategic andTactical Asset Allocation; 1.4 The Investment Process; Deviations fromtheTarget Weights oftheSAA; 1.5 Rebalancing; Buy-and-Hold; Constant Mix; Constant Proportion Portfolio Insurance; Why theNeed foraRebalancing Strategy?; An Empirical Study; 1.6 Conclusion; References; 2: Performance Evaluation; 2.1 Benchmarks; Broad Market Indices
Fundamentally Based IndicesStyle-Based Indices; Customized Indices; Asset Allocation Benchmarks; 2.2 Risk-Adjusted Performance; The Treynor Ratio; The Sharpe Ratio; Jensen's Alpha; The Information Ratio; M2; Practical Issues; 2.3 Performance Attribution; Calculating Differential Returns; The Brinson, Hood andBeebower ("BHB") Model; The Interaction Effect; An Example; The Brinson-Fachler ("BF") Model; 2.4 Conclusion; References; 3: Strategic Versus Tactical Asset Allocation; 3.1 Absolute Versus Relative Risk; The SAA asaDecision; 3.2 Market Efficiency; Micro-Efficiency
Macro-Inefficiency3.3 The Importance ofAsset Allocation; 3.4 Time Diversification; The Importance ofTime Horizon; Terminal Wealth; Within-Horizon Risk; The Price ofOptions; Human Capital; 3.5 Conclusion; References; Part II: Strategic Asset Allocation; 4: Long-Term Return Expectations; 4.1 The Record; The Very Long Term; The Recent Past; Time Variation; 4.2 Macro-Fundamentals; 4.3 Default-Free Government Bonds; The Yield Curve; Central Bank Policy; Bond Returns: TheHistorical Record; How Do WeCreate Expectations AbouttheReturn onGovernment Bonds?; 4.4 The Credit Market
4.5 EquitiesHow Important Are Macro-Fundamentals?; The Equity Risk Premium; The Dividend Discount Model; The Bogle Approach toDecomposing theEquity Return; Using Historical Valuations; The "Fed Model"; 4.6 Asset Returns Over theNext Ten Years; 4.7 Conclusion; References; 5: Optimizing theStrategic Asset Allocation; 5.1 Modern Portfolio Theory; 5.2 Problems withMVO; The Normality Assumption; Correlations; The Data Input; 5.3 Suggested Solutions; Risk Management; Alternative Return Distributions; Checking forRobustness; Imposing Portfolio Constraints; 5.4 Alternative Approaches
Equal Weighting: 1/N ApproachRisk Parity; Factor-Based Optimization; 5.5 Conclusion; Technical Note: Finding Risk Parity Weights; References; 6: Factor Investing I; 6.1 Classification ofFactors; Overview; Factor Analysis; 6.2 The Theoretical Framework; From Single toMultifactor Models; 6.3 Empirical Research: Macro-Factors; 6.4 Empirical Research: Equity Style Factors; Value; Size; A Three-Factor Model; Momentum; Low Volatility; Quality; Liquidity; 6.5 Empirical Research: Corporate Bond Style Factors; References; 7: Factor Investing II; 7.1 What Explains Factor Rewards?
Fundamentally Based IndicesStyle-Based Indices; Customized Indices; Asset Allocation Benchmarks; 2.2 Risk-Adjusted Performance; The Treynor Ratio; The Sharpe Ratio; Jensen's Alpha; The Information Ratio; M2; Practical Issues; 2.3 Performance Attribution; Calculating Differential Returns; The Brinson, Hood andBeebower ("BHB") Model; The Interaction Effect; An Example; The Brinson-Fachler ("BF") Model; 2.4 Conclusion; References; 3: Strategic Versus Tactical Asset Allocation; 3.1 Absolute Versus Relative Risk; The SAA asaDecision; 3.2 Market Efficiency; Micro-Efficiency
Macro-Inefficiency3.3 The Importance ofAsset Allocation; 3.4 Time Diversification; The Importance ofTime Horizon; Terminal Wealth; Within-Horizon Risk; The Price ofOptions; Human Capital; 3.5 Conclusion; References; Part II: Strategic Asset Allocation; 4: Long-Term Return Expectations; 4.1 The Record; The Very Long Term; The Recent Past; Time Variation; 4.2 Macro-Fundamentals; 4.3 Default-Free Government Bonds; The Yield Curve; Central Bank Policy; Bond Returns: TheHistorical Record; How Do WeCreate Expectations AbouttheReturn onGovernment Bonds?; 4.4 The Credit Market
4.5 EquitiesHow Important Are Macro-Fundamentals?; The Equity Risk Premium; The Dividend Discount Model; The Bogle Approach toDecomposing theEquity Return; Using Historical Valuations; The "Fed Model"; 4.6 Asset Returns Over theNext Ten Years; 4.7 Conclusion; References; 5: Optimizing theStrategic Asset Allocation; 5.1 Modern Portfolio Theory; 5.2 Problems withMVO; The Normality Assumption; Correlations; The Data Input; 5.3 Suggested Solutions; Risk Management; Alternative Return Distributions; Checking forRobustness; Imposing Portfolio Constraints; 5.4 Alternative Approaches
Equal Weighting: 1/N ApproachRisk Parity; Factor-Based Optimization; 5.5 Conclusion; Technical Note: Finding Risk Parity Weights; References; 6: Factor Investing I; 6.1 Classification ofFactors; Overview; Factor Analysis; 6.2 The Theoretical Framework; From Single toMultifactor Models; 6.3 Empirical Research: Macro-Factors; 6.4 Empirical Research: Equity Style Factors; Value; Size; A Three-Factor Model; Momentum; Low Volatility; Quality; Liquidity; 6.5 Empirical Research: Corporate Bond Style Factors; References; 7: Factor Investing II; 7.1 What Explains Factor Rewards?