By Martin L. Leibowitz
Lively 130/30 Extensions is the latest wave of disciplined funding techniques that includes uneven decision-making on long/short portfolio judgements, targeted funding risk-taking not like diversification, systematic portfolio probability administration, and adaptability in portfolio layout. This technique is the development block for a few 130/30 and 120/20 funding concepts provided to institutional and complicated excessive internet worthy person traders who are looking to deal with their portfolios actively and aggressively to outperform the industry.
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Extra info for Modern portfolio management
Example text
A long-only portfolio with a 100 percent gross weight will typically have active weights in the 50 to 60 percent range. Thus, a combination of a 30 percent AE and a corresponding 30 percent reinvestment has the potential to double the activity level of the original long-only portfolio. Indeed, it was a recognition of this high-powered impact of even a 120/20 extension that motivated some of the early interest in these strategies. P1: a/b c01 P2: c/d QC: e/f JWBT008-Leibowitz 18 T1: g November 7, 2008 12:51 Printer: Yet to come ACTIVE 130/30 EXTENSIONS AND DIVERSIFIED ASSET ALLOCATIONS TRACKING ERROR UNDER ACTIVE EXTENSION As the extension process adds new positions and/or augments the active weights, the TE increases accordingly.
Kahn. 2000b. ” Financial Analysts Journal. November/December. P1: a/b intro P2: c/d QC: e/f JWBT008-Leibowitz 8 T1: g November 7, 2008 18:51 Printer: Yet to come MODERN PORTFOLIO MANAGEMENT Grinold, R. , and R. Kahn. 2000c. ” McGraw Hill. Jacobs, B. , and K. N. Levy. 1993. ” Journal of Portfolio Management. Fall. Jacobs, B. , and K. N. Levy. 1995. ” Financial Analysts Journal. March/April. Jacobs, B. , and K. N. Levy. 1999. ” Journal of Portfolio Management. Winter. Jacobs, B. , and K. N. Levy.
Today’s market contains a wide range of liquid generic instruments tied to specific sectors. This range of generic instruments allows for more targeted applications of offset hedging that can address undesired factor exposures in the active positions. When applied on a partial basis to either the short or the long side, sector generics can improve IRs, both by reducing the TE and by facilitating more focused active positions. POSITION SIZE CONSTRAINTS The original long-only portfolio consisted of 25 active positions, each with a 2 percent fixed weight.