Quantitative portfolio management

[FaRa]

Does anyone have any references/books or techniques regarding quantitative methods for portfolio management ? Do you think this is an effective way of managing assets ?

 

[Ken Abbott]

Start with Markowitz. Then move on to QP.

 

[markhobbus]

I've read Quantitative Equity Portfolio Management by Chincarini and Kim. It is very in-depth and I didn't understand much of it but I did a little research project about the aggregate z-score model explained in the book. It can be an effective way of managing assets if implemented properly.

 

[FaRa]

This is exactly the book I was looking into. Maybe this is where I should start. Thank you both for the replies.

 

[alain]

I like these two books better than the one mentioned before:

http://goo.gl/DQ7TG

http://goo.gl/dNCnb

 

[Jayanthan]

Start with Markowitz. Then move on to QP.

did you mean http://www.amazon.com/Portfolio-Selection-Efficient-Diversification-Investments/dp/1557861080/?

 

[Ken Abbott]

did you mean http://www.amazon.com/Portfolio-Selection-Efficient-Diversification-Investments/dp/1557861080/?

Yes. Mean, variance, etc. Efficient frontier.

 

[FaRa]

has anyone experimented with this type of asset management ? do you think it has a future in the industry ?

 

[diegosanaz]

From the (little) experience I have, this works better when combined with something else. For example, picking a bunch of stock you like (from a fundamental point of view) and then apply portfolio optimization with long-only constraints.

 

[pawelach]

Hi, you can have a look at some of the post at QuantAtRisk: http://www.quantatrisk.com - there is a lot of good quality information on theory and application of the Portfolio Theory. Cheers, -Pawel

 

[Sailor Sam]

Check out Active Portfolio Management by Kahn

 

[Ian Kaplan]

When it comes to actual portfolios that will beat an index in some dimension there academic books are just a foundation. There is no substitute for actually building a portfolio, with real money. My attempt at this can be found here: http://www.bearcave.com/finance/etf2/index.html

 

[zyz]

Bloch has published a pretty nice book and it looks promising: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2543802

 

[Ian Kaplan]

Bloch has published a pretty nice book and it looks promising: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2543802

How promising the book looks is a matter of perspective. It doesn't look terribly useful for a practitioner, as far as I can tell. The abstract reads:

We discuss risk, preference and valuation in classical economics, which led academics to develop a theory of market prices, resulting in the general equilibrium theories. However, in practice, the decision process do not follow that theory since the qualitative aspect coming from human decision making process is missing. Further, a large number of studies in empirical finance showed that financial assets exhibit trends or cycles, resulting in persistent inefficiencies in the market, that can be exploited. The uneven assimilation of information emphasised the multifractal nature of the capital markets, recognising complexity. New theories to explain financial markets developed, among which is a multitude of interacting agents forming a complex system characterised by a high level of uncertainty. Recently, with the increased availability of data, econophysics emerged as a mix of physical sciences and economics to get the best of both world, in view of analysing more deeply asset predictability. For instance, data mining and machine learning methodologies provide a range of general techniques for classification, prediction, and optimisation of structured and unstructured data. Using these techniques, one can describe financial markets through degrees of freedom which may be both qualitative and quantitative in nature. In this book we detail how the growing use of quantitative methods changed finance and investment theory. The most significant benefit being the power of automation, enforcing a systematic investment approach and a structured and unified framework. We present in a chronological order the necessary steps to identify trading signals, build quantitative strategies, assess expected returns, measure and score strategies, and allocate portfolios.

Econophysics, machine learning, multifractals and data mining. They do a good job of hitting a bunch of buzzwords.

I have only glanced over the book, but the section "Quantitative Trading in Inefficient Markets" summarizes market neutral long-short portfolios, pairs trading and other strategies without providing any actual examples and results.

The good news is that the book is free, so you can decide for yourself.

I cannot claim to have written an opus on portfolio construction (although I may someday). But I do have a paper that discusses concrete results. So far my current portfolio is beating the S&P 500. And my results are completely reproducible (I provide all of the R code and the data can be downloaded from yahoo). See:

http://www.bearcave.com/finance/etf2/index.html (which is also referenced above).

 

[IntoDarkness]

How promising the book looks is a matter of perspective. It doesn't look terribly useful for a practitioner, as far as I can tell. The abstract reads:



Econophysics, machine learning, multifractals and data mining. They do a good job of hitting a bunch of buzzwords.

I have only glanced over the book, but the section "Quantitative Trading in Inefficient Markets" summarizes market neutral long-short portfolios, pairs trading and other strategies without providing any actual examples and results.

The good news is that the book is free, so you can decide for yourself.

I cannot claim to have written an opus on portfolio construction (although I may someday). But I do have a paper that discusses concrete results. So far my current portfolio is beating the S&P 500. And my results are completely reproducible (I provide all of the R code and the data can be downloaded from yahoo). See:

http://www.bearcave.com/finance/etf2/index.html (which is also referenced above).

based on ur past performance, im investing portion of my ira according to ur etf selection and weighting scheme

 

[Ian Kaplan]

based on ur past performance, im investing portion of my ira according to ur etf selection and weighting scheme

Do so at your own risk. Please make sure that you understand the paper and what I'm doing. Past results are no guarantee of future results.

The weights are for Dec 2, 2014. You might want to rerun the code with the current end date if you know how to use R.

This said, I currently plan on publishing the paper every quarter. So there will be a new one in early March. Of course you can also run the R code yourself.

Final note: I trade with Interactive Brokers, where the transaction costs can be ignored (generally). This is not always true for brokers like Schwab. In an early portfolio I didn't think carefully and had only a few shares in some positions. At $8/trade this can be a hit for only a few shares.

 

[zyz]

How promising the book looks is a matter of perspective. It doesn't look terribly useful for a practitioner, as far as I can tell. The abstract reads:



Econophysics, machine learning, multifractals and data mining. They do a good job of hitting a bunch of buzzwords.

I have only glanced over the book, but the section "Quantitative Trading in Inefficient Markets" summarizes market neutral long-short portfolios, pairs trading and other strategies without providing any actual examples and results.

The good news is that the book is free, so you can decide for yourself.

I cannot claim to have written an opus on portfolio construction (although I may someday). But I do have a paper that discusses concrete results. So far my current portfolio is beating the S&P 500. And my results are completely reproducible (I provide all of the R code and the data can be downloaded from yahoo). See:

http://www.bearcave.com/finance/etf2/index.html (which is also referenced above).

Fair points. However, agreeing with your previous comment in this thread, this book actually might be a good foundation for those who are just starting out. I haven't had a chance to go through the book, but the range of topics covered in the book seems to me very comprehensive.

Thanks for the link, will definitely check it out.

 

[Siddhartha Latwal]

What's the real diffenrece between Quants and Traders/PMs(Macro Analysts) and is there no intersection between the two disciplines?