By Robert L. Hagin

A brand new examine the real factor of funding administration within the twenty first centuryWritten for pro and personal investors-as good as fiduciaries who depend upon funding professionals-this ebook offers the content material of a complicated investment-management direction in an easy-to-read, question-and-answer format.Robert L. Hagin (Haverford, PA) is a 30-year funding administration veteran who lately retired as government Director for Morgan Stanley funding administration.

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Extra info for Investment Management: Portfolio Diversification, Risk, and Timing--Fact and Fiction (Wiley Finance)

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Fact. b. Fiction. Investors who believe that financial markets have evolved into “quants” versus “traditionalists” have forgotten the admonition that the investment industry is built on disagreement. There is ample disagreement as to the motivations to trade among quants and traditional investors alike. Therefore, the correct answer is “b”—it is a fiction to say that quants are on one side of trades and traditional investors are on the other. 6. 3 You and your shadow investors each held the stocks for one year.

The late Fischer Black, a highly acclaimed academic and investment practitioner who is best known for his pioneering work on option-pricing theory (and the discovery of the Black-Scholes option pricing model), had a knack for putting forth stimulating ideas. ” He labels persons who trade securities on the basis of a bewildering array of elements that, in fact, are not likely to be precursors of future prices, “noise” traders. Information or Noise? ”4 That is, they are all useless. S. strategist and chief quantitative strategist at Merrill Lynch, courageously entitled his 2002 book Navigate the Noise: Investing in the New Age of Media and Hype.

A random (or a statistically independent) event is an occurrence whose outcome cannot be predicted from preceding events. Examples of random events are the result of a coin toss and the spin of a roulette wheel. For such events, the outcome of any single trial is determined by chance and is impossible to predict. For example, if you 25 Random Occurrences toss a fair coin it is impossible to know in advance whether that particular coin will fall heads or tails. Let’s return to the question of a gambler’s odds after observing a run (a sequence of one kind of outcome).

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