CFA Institute is the premier association for investment professionals around the world, with over 170,000 members more than 160 countries. Since 1963 the organization has developed and administered the renowned Chartered Financial Analyst Program. With a rich history of leading the investment profession, CFA Institute has set the highest standards in ethics, education, and professional excellence within the global investment community, and is the foremost authority on investment profession conduct and practice. Each book in the CFA Institute Investment Series is geared toward industry practitioners along with graduate-level finance students and covers the most important topics in the industry.
The authors of these cutting-edge books are themselves industry professionals and academics and bring their wealth of knowledge and expertise to this series. PORTFOLIO MANAGEMENT IN PRACTICE Volume 3 Equity Portfolio Management Cover image: © r.nagy/Shutterstock Cover design: Wiley Copyright © 2004, 2007, 2015, 2021 by CFA Institute. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
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For more information about Wiley products, visit www. ABOUT THE CFA INSTITUTE INVESTMENT SERIES 7. CHAPTER 1 OVERVIEW OF EQUITY SECURITIES 1. EQUITY SECURITIES IN GLOBAL FINANCIAL MARKETS 4.
TYPES AND CHARACTERISTICS OF EQUITY SECURITIES 5. PRIVATE VERSUS PUBLIC EQUITY SECURITIES 6. INVESTING IN NON-DOMESTIC EQUITY SECURITIES 7. RISK AND RETURN CHARACTERISTICS OF EQUITY SECURITIES 8.
EQUITY SECURITIES AND COMPANY VALUE 9. CHAPTER 2 MARKET EFFICIENCY 1. THE CONCEPT OF MARKET EFFICIENCY 4. FORMS OF MARKET EFFICIENCY 5.
MARKET PRICING ANOMALIES 6. CHAPTER 3 OVERVIEW OF EQUITY PORTFOLIO MANAGEMENT 1. THE ROLES OF EQUITIES IN A PORTFOLIO 4. EQUITY INVESTMENT UNIVERSE 5.
INCOME AND COSTS IN AN EQUITY PORTFOLIO 6. EQUITY INVESTMENT ACROSS THE PASSIVE–ACTIVE SPECTRUM 8. CHAPTER 4 PASSIVE EQUITY INVESTING 1. APPROACHES TO PASSIVE EQUITY INVESTING 5.
TRACKING ERROR MANAGEMENT 7. SOURCES OF RETURN AND RISK IN PASSIVE EQUITY PORTFOLIOS 8. CHAPTER 5 ANALYSIS OF ACTIVE PORTFOLIO MANAGEMENT 1. ACTIVE MANAGEMENT AND VALUE ADDED 4.
COMPARING RISK AND RETURN 5. THE FUNDAMENTAL LAW OF ACTIVE MANAGEMENT 6. APPLICATIONS OF THE FUNDAMENTAL LAW 7. CHAPTER 6 ACTIVE EQUITY INVESTING: STRATEGIES 1.
APPROACHES TO ACTIVE MANAGEMENT 4. TYPES OF ACTIVE MANAGEMENT STRATEGIES 5. CREATING A FUNDAMENTAL ACTIVE INVESTMENT STRATEGY 6. CREATING A QUANTITATIVE ACTIVE INVESTMENT STRATEGY 7.
EQUITY INVESTMENT STYLE CLASSIFICATION 8. CHAPTER 7 ACTIVE EQUITY INVESTING: PORTFOLIO CONSTRUCTION 1. BUILDING BLOCKS OF ACTIVE EQUITY PORTFOLIO CONSTRUCTION 4. APPROACHES TO PORTFOLIO CONSTRUCTION 5.
ALLOCATING THE RISK BUDGET 6. ADDITIONAL RISK MEASURES USED IN PORTFOLIO CONSTRUCTION AND MONITORING 7. IMPLICIT COST-RELATED CONSIDERATIONS IN PORTFOLIO CONSTRUCTION 8. THE WELL-CONSTRUCTED PORTFOLIO 9.
LONG/SHORT, LONG EXTENSION, AND MARKET-NEUTRAL PORTFOLIO CONSTRUCTION 10. CHAPTER 8 TECHNICAL ANALYSIS 1. TECHNICAL ANALYSIS: PRINCIPLES, ASSUMPTIONS, AND LINKS TO INVESTMENT ANALYSIS 4. APPLICATIONS TO PORTFOLIO MANAGEMENT 7.
ABOUT THE AUTHORS 17. ABOUT THE CFA PROGRAM 18. END USER LICENSE AGREEMENT Guide 1. Table of Contents 3.
About the CFA Institute Investment Series 9. About the Authors 12. About the CFA Program 13. End User License Agreement Pages 1.
470 PREFACE We are pleased to bring you Equity Portfolio Management, Volume 3 of Portfolio Management in Practice. This series of three volumes serves as a particularly important resource for investment professionals who recognize that portfolio management is an integrated set of activities. The topic coverage in the three volumes is organized according to a well-articulated portfolio management decision-making process. This organizing principle— in addition to the breadth of coverage, the currency and quality of content, and its meticulous pedagogy—distinguishes the three volumes in Portfolio Management in Practice series of volumes from other investment texts that deal with portfolio management.
The content was developed in partnership by a team of distinguished academics and practitioners, chosen for their acknowledged expertise in the field, and guided by CFA Institute. It is written specifically with the investment practitioner in mind and is replete with examples and practice problems that reinforce the learning outcomes and demonstrate real-world applicability. The CFA Program curriculum, from which the content of this book was drawn, is subjected to a rigorous review process to assure that it is: faithful to the findings of our ongoing industry practice analysis Valuable to members, employers, and investors Globally relevant Generalist (as opposed to specialist) in nature replete with sufficient examples and practice opportunities Pedagogically sound The accompanying workbook is a useful reference that provides Learning Outcome Statements, which describe exactly what readers will learn and be able to demonstrate after mastering the accompanying material. additionally, the workbook has summary overviews and practice problems for each chapter.
We hope you will find this and other books in the CFA Institute Investment Series helpful in your efforts to grow your investment knowledge, whether you are a relatively new entrant or an experienced veteran striving to keep up to date in the ever-changing market environment. CFA Institute, as a long-term committed participant in the investment profession and a not- for-profit global membership association, is pleased to provide you with this opportunity. ACKNOWLEDGMENTS Special thanks to all the reviewers, advisors, and question writers who helped to ensure high practical relevance, technical correctness, and understandability of the material presented here. We would like to thank the many others who played a role in the conception and production of this book: the Curriculum and Learning Experience team at CFA Institute with special thanks to the curriculum directors, past and present, who worked with the authors and reviewers to produce the chapters in this book, the Practice Analysis team at CFA Institute, and the Publishing and Technology team for bringing this book to production.
ABOUT THE CFA INSTITUTE INVESTMENT SERIES CFA Institute is pleased to provide the CFA Institute Investment Series, which covers major areas in the field of investments. We provide this best-in-class series for the same reason we have been chartering investment professionals for more than 45 years: to lead the investment profession globally by setting the highest standards of ethics, education, and professional excellence. The books in the CFA Institute Investment Series contain practical, globally relevant material. They are intended both for those contemplating entry into the extremely competitive field of investment management as well as for those seeking a means of keeping their knowledge fresh and up to date.
This series was designed to be user friendly and highly relevant. We hope you find this series helpful in your efforts to grow your investment knowledge, whether you are a relatively new entrant or an experienced veteran ethically bound to keep up to date in the ever-changing market environment. As a long-term, committed participant in the investment profession and a not-for-profit global membership association, CFA Institute is pleased to provide you with this opportunity. THE TEXTS Corporate Finance: A Practical Approach is a solid foundation for those looking to achieve lasting business growth.
In today’s competitive business environment, companies must find innovative ways to enable rapid and sustainable growth. This text equips readers with the foundational knowledge and tools for making smart business decisions and formulating strategies to maximize company value. It covers everything from managing relationships between stakeholders to evaluating merger and acquisition bids, as well as the companies behind them. Through extensive use of real-world examples, readers will gain critical perspective into interpreting corporate financial data, evaluating projects, and allocating funds in ways that increase corporate value.
Readers will gain insights into the tools and strategies used in modern corporate financial management. Equity Asset Valuation is a particularly cogent and important resource for anyone involved in estimating the value of securities and understanding security pricing. A well-informed professional knows that the common forms of equity valuation—dividend discount modeling, free cash flow modeling, price/earnings modeling, and residual income modeling—can all be reconciled with one another under certain assumptions. With a deep understanding of the underlying assumptions, the professional investor can better understand what other investors assume when calculating their valuation estimates.
This text has a global orientation, including emerging markets. Fixed Income Analysis has been at the forefront of new concepts in recent years, and this particular text offers some of the most recent material for the seasoned professional who is not a fixed-income specialist. The application of option and derivative technology to the once staid province of fixed income has helped contribute to an explosion of thought in this area. Professionals have been challenged to stay up to speed with credit derivatives, swaptions, collateralized mortgage securities, mortgage-backed securities, and other vehicles, and this explosion of products has strained the world’s financial markets and tested central banks to provide sufficient oversight.
Armed with a thorough grasp of the new exposures, the professional investor is much better able to anticipate and understand the challenges our central bankers and markets face. International Financial Statement Analysis is designed to address the ever-increasing need for investment professionals and students to think about financial statement analysis from a global perspective. The text is a practically oriented introduction to financial statement analysis that is distinguished by its combination of a true international orientation, a structured presentation style, and abundant illustrations and tools covering concepts as they are introduced in the text. The authors cover this discipline comprehensively and with an eye to ensuring the reader’s success at all levels in the complex world of financial statement analysis.
Investments: Principles of Portfolio and Equity Analysis provides an accessible yet rigorous introduction to portfolio and equity analysis. Portfolio planning and portfolio management are presented within a context of up-to-date, global coverage of security markets, trading, and market-related concepts and products. The essentials of equity analysis and valuation are explained in detail and profusely illustrated. The book includes coverage of practitioner- important but often neglected topics, such as industry analysis.
Throughout, the focus is on the practical application of key concepts with examples drawn from both emerging and developed markets. Each chapter affords the reader many opportunities to self-check his or her understanding of topics. All books in the CFA Institute Investment Series are available through all major booksellers. And, all titles are available on the Wiley Custom Select platform at http://customselect.