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Subject Index 389 Information coefficient (IC), 5,6, 169 Information ratio (R), 253 Innovations, 185n Intel shares, 22 Investor psychology, 105-109,123, 276 Investor utility, 253 IR, 253 January effect, 59,73-77,136-140 Lagging price, 60 Large-cap stocks, 23,264-265,266, 372-374 Late reporter anomaly, 55 Law of one alpha, 247-250 Leverage, 317,342 Leverage points, 226n Liquidity buffer, 324,331 Long-short equity investing, 244, 245,283-367 advantages, 290,293,328-331, . 350-352 alpha transport, 377-379 asset class, 307,314 beta-neutral portfolio, 360,361 borrowability, 341,353 building market-neutral , portfolio, 322-326 costs, 318,341443,353-355 custody issues, 306 dollar-neutral portfolio, 359, 360 equitized strategy, 290,295,296, 299-302,308,331-334 ERISA, 306,344,345 hard-to-borrow shares, 305,341 hedge strategy, 290,297,309 impediments to short selling, 291 implementation, 303,304 integrated approach, 349-367 integrated optimization, 328-331,344 legal issues, 306 Long-short equity investing (Con’d) leverage, 317,342 liquidity buffer, 324,331 management fees, 318,343,354, 355 market-neutral strategy, 289, 295,296,299,301,308,322-326 mechanics, 297-300 morality issues, 307 myths, 311-320 optimal equitized portfolio, 361-364 optimal neutral portfolio, 358, 359 optimal portfolio, 355-364 portfolio construction techniques, 303,304 portfolio payoff patterns, 294-296 practical issues/concerns, 304 prime broker, 297,306,341 principal packages, 342 quantitative vs. judgmental approach, 303 residual risk, 343,344 risk, 316,317,343,344,355 short rebate, 298 short squeeze, 305,348n shorting issues, 304,305 tax treatment, 306,317 theoretical tracking error, 300, 301 trading, 334-339 trading costs, 354 trading issues, 305,306 uptick rules, 341,342 Look-ahead bias, 60,165 Low P/E, 27,31,55,111,272 Low price, 56,112,268-272 MA terms, 177 Macroeconomic events, 39,63, 81-84,239,276 (See also Empirical return regularities)
390 Subied Index MAE, 170,182 Market complexity, 12,15,20, 2545,236-238 anomalies, 26,27 anomalous pockets of inefficiency (API), 35-39 Bayesian random walk forecasting, 4143 empirical return regularities (ERRS), 37,3941 modeling empirical return regularities, 40,41 pure returns, 21,22,29-31,35 return effects (see Return effects) Market ineffiaency, 31,32 Market-neutral long-short portfolio, 289,295,296,299,301, 308,322-326 Market psychology, 105-109,123, 276 ME, 169,182 Mean absolute error (MAE), 170, 182 Mean error (ME), 169,182 Measurement error, 193-196 (See also Predictor specification) Measures of central tendency, 194, 195 Methodology: disentangling, 59-61 ' . forecasting techniques (see Forecasting techniques) value modeling (DDM), 110,113 Mispriced securities, 19 Missing data values, 209-212 Modeling empirical return regularities, 40,41 Molecular biology, 25 Monotone regression, 224n, 225n Moving-average (MA) terms, 177 Multicollinearity, 62 Multifactor CAPM, 33,64 Multivariate regression, 110 Multivariate time series techniques, 40 nth-order autocorrelation, 183n Ndive returns, 21-22,29,62,110, 268-272,274 Negative surprises, 38,58 Neglect, 56,111 Newton's laws of motion, 25 Nonlinearity, 22,239 (See also Distributed effects) Noise, 107,171 Nonzero intercepts, 44n OLS regression, 170 One unit of exposure, 113 One-way causality, 175 Opening prices, 150 Optimization techniques, 9,13, 231,232,241 Ordered systems, 20,25 Ordinary least-squares (0s) regression, 170 Out-of-sample tests, 40,170,171 Overfitting, 41,177 Overpricing, 327 Overreaction, 109 p value, 224n Pairs trading, 303 Passive management, 4,10,26, 370 Pearson correlation, 224n Performance attribution, 233 Portfolio construction, 2,241-242, 229-282 high-definition style rotation, 263-282 holistic approach, 23.5-250 residual risk, 251-261 unified approach, 235-246 (See also Long-short equity investing) Portfolio optimization, 2,13,231, 232,241 Portmanteau Q statistic, 174 Predictor specification, 193-227 alternative specifications for portfolio screening, 196-204
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EQUITY MANAGEMENT.
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EQUITY MANAGEMENT Quantitative Anal
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To Ilene, Lauren, Julie, Sam, and E
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CONTENTS Foreword by Harry M. Marko
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Contents ix Chapter 4 Calendar Anom
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Contents xi Implications 272 High-D
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FOREWORD by Harry M. Markowitz, Nob
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Foreword xv In practice, of course,
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Foreword xvii that an RDM would con
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xix
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INTRODUCTION Life on the Leading Ed
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Life on the Leading Edge 3 tion abo
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Life on the Leading Edge 5 clude th
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Life on the Edge Leading 7 stocks t
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Life on the Leading Edge 9 . Quanti
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Life on the Leading Edge 11 By the
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Life on the Leading Edge 13 ple, st
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Life on the Leading Edge 15 find be
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Life on the Leading Edge 17 equal t
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P A R T ONE Selecting Securities A
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Selectine Securities 21 stocks. Suc
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selecting secunties 23 unmoved by s
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CHAPTER 1 The Complexity of the Sto
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The Complexity of the Stock Market
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The Complexity of the St& Market 31
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The Complexity of the St& Market 37
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The of the Complexity Stock Market
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The Comdexitv of the Stock Market 4
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V 7
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Disentangling Equity Return Regular
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Disentangling Equity Rehun Regulari
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Disentangling Equity Rehun Regulari
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64 selecting securities aged 59 bas
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66 selecting Securities FIGURE 2-2
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68 selecting securities FIGURE 2-3
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70 selecting securities tic of 17.8
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72 selecting securities Some Implic
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74 selecting securities Table 2-2 d
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I l
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82 Seleaine Securities these time-s
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84 selecting securities of 9.7. The
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86 selecting securities 2. There ar
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and deferring gains [as per Constan
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90 selecting securities 35. For exa
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92 selecting securities 49. Before
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94 selecting securities Ball, R. 19
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96 selecting securities Iowa, Ames.
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98 Seleaine securities James, W. an
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100 selecting securities Nicholson,
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102 selecting securities Tinic, S.
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104 selecting securities VALUE AND
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106 selecting securities Street Jou
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108 Selectine Securities This is no
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110 selecting securities plaining s
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112
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114 selecting securities transient
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116 selecting securities Na'ive Exp
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118 selecting securities (1988c)l.
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l20 selecting securities average of
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124 selecting securities We have de
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126 selecting securities movements
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l28 selecting securities 34. Pensio
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130 selecting securities Einhom, S.
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132 Selectine securities Poterba, J
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136 selecting securities The availa
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138 selecting securities subsequent
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142 Selectine securities FIGURE 4-2
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144 selecting securities others usi
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146 Selectine Securities FIGURE 4-3
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l48 SelectirlE securities a market
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150 . selecringsecurities There is
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152 selecting securities 1981 and 1
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154 seleding securities Chari,V., R
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156 Selectine securities McNichols,
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160 selecting securities that betwe
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162 selecting securities Handa, Kot
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164 selecting securities risk does
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166 selecting securities returns ac
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168 selecting securities ket return
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~ more 170 Selectine securities tiv
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176 selecting securities hibit feed
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178 Seledine securities multivariat
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-2 1982 1983 1984 1985 1986 1987 18
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182 selecting securities rate produ
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184 Seledine Securities 11. Further
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186 Seleaine securities REFERENCES
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188 selecting securities Fama, E. a
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190 selecting securities Miller, E.
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194 Selectine Securities modeling p
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196 selecting securities surement e
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Earnings Estimates, Predictor Speaf
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0 a I "F c2 . 2 0
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216 selecting securities The Return
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U) J U) C Q) U) C S r jo-0 eke I C
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?68% $1-0 I 220
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222 Seleaine Securitiff ings data f
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224 selecting securities 4. The dif
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226 selecting securities 20. Note t
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230 Managing Portfolios have concen
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232 Managing Portfolios portfolios.
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234 Manaeine Portfolios of investme
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236 Managing Portfolios There is, n
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238 Managing Portfolios bound to ig
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240 Managing Portfolios expected to
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242 Managing Portfolios mance attri
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244 Managing Portfolios those inves
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246 Managing Portfolios vide a bigg
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248 Managing Portfolios If the firm
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250 Managing Portfolios REFERENCE J
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252 Managing Portfolios This invest
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254 Managing Portfolios FIGURE S-l
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256 Managing Portfolios manager‘s
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258 Managing Portfolios FIGURE S 4
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260 Managing Portfolios Imposition
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264 Managing Portfolios Recent stud
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High-Definition Style Rotation 267
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0 N
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272 Managing Portfolios TABLE 10-2
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274 Managing Portfolios ing pure re
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276 Managing Portfolios HIGH-DEFINI
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278 Managing Portfolios - FIGURE 10
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280 Managing Portfolios FIGURE 10-S
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282 Managing Portfolios REFERENCES
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284 Expanding Opportunities and “
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286 Expanding Opportunities such as
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290 ExpandingOpprtunities vided sho
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292 Expandingoppo~ties F I G U R E
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294 Expanding Opportunities F I G U
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2% ExpandingOpportunities FIGURE 11
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298 Expanding Opportunities Typical
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300 Expandingopportunities F I G U
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302 Expanding Opportunities news st
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304 ExpandingOpportunities dinate l
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306 ExpandingOpportunities Also, ma
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308 Expanding Opportunities FIGURE
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310 Expanding oppo~ties -and- . 199
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312 ExpandingOpportunities applied
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314 Expanding Opportunities A secur
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316 ExpandingOpportunities in 1987,
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318 Expanding Opportunities the $4.
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320 Expanding Opportunities portfol
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322 Expanding Opportunities managem
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324 Expanding Opportunities The sec
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326 Expanding Opportunities Overall
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328 Expanding Opportunities risen o
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330 Expanding Opportunities lio and
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332 Expanding Opportunities FIGURE
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334 Expanding Opportunities , use o
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The Long and Short on Long-Short 33
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Page 403 and 404: 382 Name Index Clarke, Roger G., 25
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Page 407 and 408: 386 Name Index Swanson, H., 183,188
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