While mainstream financial theories and applications assume that asset returns are normally distributed, overwhelming empirical evidence shows otherwise. Yet many professionals don’t appreciate the highly statistical models that take this empirical evidence into consideration. Fat-Tailed and Skewed Asset Return Distributions examines this dilemma and offers readers a less technical look at how portfolio selection, risk management, and option pricing modeling should and can be undertaken when the assumption of a non-normal distribution for asset returns is violated. Topics covered in this comprehensive book include an extensive discussion of probability distributions, estimating probability distributions, portfolio selection, alternative risk measures, and much more. Fat-Tailed and Skewed Asset Return Distributions provides a bridge between the highly technical theory of statistical distributional analysis, stochastic processes, and econometrics of financial returns and real-world risk management and investments.

This book analyzes several investment strategies that are applied to an international equity portfolio. The evaluated strategies are: the Simple Crossover Moving Average, the Equally Weighted Portfolio, the Minimum Variance Portfolio, the Certainty Equivalent Tangency Portfolio, the James Stein Estimator and the Black Litterman Model. Besides the applied methodology part which demonstrates how to implement the considered strategies, the empirical section shows from the viewpoint of a European investor whether the final performance parameters are mainly due to returns of foreign markets or through exchange rate developments. The investigation is carried out from an ex ante as well as from an ex post perspective. In order to examine the time window of a strategy, the in- and the out of the sample periods are varied. The empirical investigation indicates that - the relative young more sophisticated approaches are superior to the traditional strategies, the impact of exchange rate developments cannot be ignored in an equity portfolio, nearly no conclusion can be drawn in the context of a superior in- and out of the sample period.

This book provides a new modeling approach for portfolio optimization problems involving a lack of sufficient historical data. The content mainly reflects the author’s extensive work on uncertainty portfolio optimization in recent years. Considering security returns as different variables, the book presents a series of portfolio optimization models in the framework of credibility theory, uncertainty theory and chance theory, respectively. As such, it offers readers a comprehensive and up-to-date guide to uncertain portfolio optimization models.

Inhaltsangabe:This thesis explains the methodology of the considered investment strategies and demonstrates gradually how they are implemented. Besides the ebook, the purchaser of this article receives also the underlying excel sheets. These excel sheets show without using macros how step-by-step the different strategies are implemented. Introduction: Nowadays the merits of international portfolio diversification are widely acknowledged in the academic literature. The risk reduction of an international portfolio can be achieved because the correlations between international asset markets are rather low compared to a portfolio which entirely consists of national securities. Hence, international investment strategies are superior compared to strategies which invest solely in a local market since they are able to generate a greater return for a certain risk, or less risk for a given return. Beside the advantages of international diversification, the investment in other currencies bears an additional uncertainty that arises through foreign exchange rate fluctuations. However, the development of the exchange rate is not solely a one-sided downside risk; it is also a chance of a higher return since the movement can be in favor of a position. In other words, exchange rate changes have different effects on investors of different currencies. Even if the domestic return is much lower than in other countries, it might be the case that an investment in another state will result in a lower return because of the exchange rate development. Therefore, the residence and the therewith-associated currency of an investor is crucial for the result of an international diversified portfolio. In order to analyze the two risk drivers of an international diversified portfolio separately, the results of the investment strategies are calculated in two ways - with and without the exchange rate development. This method allows evaluating whether exchange rate movements are dispensable or if currency fluctuations are significant for international equity portfolios and therefore the exchange rate risk should be hedged. The choice of the investment strategy should be compatible with the needs, the expectations and the personality of an investor. In many papers utility theory is used to determine an investor s optimal investment strategy. These approaches use utility functions to figure out which strategy fits best to an investor. The methodology of this paper is from another [...]

An updated guide to the theory and practice of investment management Many books focus on the theory of investment management and leave the details of the implementation of the theory up to you. This book illustrates how theory is applied in practice while stressing the importance of the portfolio construction process. The Second Edition of The Theory and Practice of Investment Management is the ultimate guide to understanding the various aspects of investment management and investment vehicles. Tying together theoretical advances in investment management with actual practical applications, this book gives you a unique opportunity to use proven investment management techniques to protect and grow a portfolio under many different circumstances. Contains new material on the latest tools and strategies for both equity and fixed income portfolio management Includes key take-aways as well as study questions at the conclusion of each chapter A timely updated guide to an important topic in today's investment world This comprehensive investment management resource combines real-world financial knowledge with investment management theory to provide you with the practical guidance needed to succeed within the investment management arena.

Praise for Robust Portfolio Optimization and Management "In the half century since Harry Markowitz introduced his elegant theory for selecting portfolios, investors and scholars have extended and refined its application to a wide range of real-world problems, culminating in the contents of this masterful book. Fabozzi, Kolm, Pachamanova, and Focardi deserve high praise for producing a technically rigorous yet remarkably accessible guide to the latest advances in portfolio construction." --Mark Kritzman, President and CEO, Windham Capital Management, LLC "The topic of robust optimization (RO) has become 'hot' over the past several years, especially in real-world financial applications. This interest has been sparked, in part, by practitioners who implemented classical portfolio models for asset allocation without considering estimation and model robustness a part of their overall allocation methodology, and experienced poor performance. Anyone interested in these developments ought to own a copy of this book. The authors cover the recent developments of the RO area in an intuitive, easy-to-read manner, provide numerous examples, and discuss practical considerations. I highly recommend this book to finance professionals and students alike." --John M. Mulvey, Professor of Operations Research and Financial Engineering, Princeton University