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Description of
Financial Modeling of the Equity Market
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An inside look at modern approaches to modeling equity portfolios
Financial Modeling of the Equity Market is the most comprehensive, up-to-date guide to modeling equity portfolios. The book is intended for a wide range of quantitative analysts, practitioners, and students of finance. Without sacrificing mathematical rigor, it presents arguments in a concise and clear style with a wealth of real-world examples and practical simulations.
This book presents all the major approaches to single-period return analysis, including modeling, estimation, and optimization issues. It covers both static and dynamic factor analysis, regime shifts, long-run modeling, and cointegration. Estimation issues, including dimensionality reduction, Bayesian estimates, the Black-Litterman model, and random coefficient models, are also covered in depth. Important advances in transaction cost measurement and modeling, robust optimization, and recent developments in optimization with higher moments are also discussed.
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Financial Modeling of the Equity Market
- Chapter headings |
Preface
Acknowledgments
About the Authors
1. Introduction
PART ONE: PORTFOLIO ALLOCATION: CLASSICAL THEORY AND MODERN EXTENSIONS
2. Mean-Variance Analysis and Modern Portfolio Theory
3. Transaction and Trading Costs
4. Applying the Portfolio Selection Framework in Practice
5. Incorporating Higher Moments and Extreme Risk Measures
6. Mathematical and Numerical Optimization
PART TWO: MANAGING UNCERTAINTY IN PRACTICE
7. Equity Price Models
8. Forecasting Expected Return and Risk
9. Robust Frameworks for Estimation and Portfolio Allocation
PART THREE: DYNAIC MODELS FOR EQUITY PRICES
10. Feedback and Predictors in Stock Markets
11. Individual Price Processes: Univariate Models
12. Multivariate Models
13. Model Selection and its Pitfalls
PART FOUR: MODEL ESTIMATION AND RISK MITIGATION
14. Estimation of Regression Models
15. Estimation of Linear Dynamic Models
16. Estimation of Hidden Variable Models
17. Model Risk and its Mitigation
Appendix A. Differences Equations
Appendix B. Correlations, Regressions, and Copulas
Appendix C. Data Description
Index
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Authobiography of
Frank J. Fabozzi, Sergio M. Focardi, Petter N. Kolm
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Sergio M. Focardi (Paris, France) is a founding partner of the Paris-based consulting firm, The Intertek Group. He is a member of the editorial board of the Journal of Portfolio Management. He is also the author of numerous articles and books on financial modeling. Petter N. Kolm, PhD (New Haven, CT and New York, NY), is a graduate student in finance at the Yale School of Management and a financial consultant in New York City. Previously, he worked in the Quantitative Strategies Group of Goldman Sachs Asset Management, where he developed quantitative investment models and strategies.
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