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Alpha's Table of Contents
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Perception and Reality
Chapter Excerpts
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How pioneers as Harry Markowitz, William Sharpe, and James Tobin revolutionized Wall Street with their theories linking risk and return.
2. The Revolution of Index-Based Investing
Since the launch of the first index fund in 1971 by Mellon Capital Management, the percentage of assets dedicated to index-based strategies has skyrocketed. A look at how this growth has changed the course of institutional investment management.
3. Can Anyone Outperform the Market?
When "benchmarked" to the appropriate index, active fund managers have failed to outperform the overall market. An examination of fund risks and returns, and the workings of a typical mutual fund, can explain much of this bias.
4. Alpha Respite I: The Case of the Tempted Money Manager
Can the desire for increasing client assets coincide with the best interests of investors? One money manager’s – and client’s - solution.
Free Lunch, Anyone?
Arbitrage trading has produced attractive returns with negligible volatility. This popular strategy, and the true risks of participation, is examined.
6. The Search for Financial DNA
Arbitrage pricing theory, which attempts to categorize market risk into a small number of components, is contrasted with the Capital Asset Pricing Model, which states that the return of a stock is directly related to its risk relative to the overall market
7. Managed Futures and "Portable" Alpha
As the asset class with the bad reputation, derivatives are blamed for everything from the stock market crash of 1987 to excessive speculative activity in the capital markets. Meanwhile, proponents of futures commonly utilize these flexible instruments to construct portfolios that need minimal funding, and that protect portfolios in times of extreme volatility. The history – and the promising future - of the managed futures industry.
8. Alpha Respite II: The Case of the Converging Correlations
Market neutral programs allow investors to participate in strategies that are not correlated to the movements of traditional investments like stocks and bonds. But what happens when asset classes move in unison? A postmortem examination of the market meltdown of August 1998. Read a chapter excerpt.
The Business of Adding Value
9. Alpha and Taxes
Pensions and endowments have reaped the rewards of value-added management for years. But how alpha managers stack up on an after-tax basis? How short-term capital gains and high turnover can effect returns. Read a chapter excerpt.
10. Behavioral Finance: Are We Really That Irrational?
Behavioral finance tries to explain market anomalies by pointing to the well-documented tendency of humans to act in an irrational manner. But does this new theory ask more questions than it answers?
11. The Future: Technology and Capital Markets
With increases in technology, does the ability of managers to create market-beating strategies increase or decrease? Market efficiency and the year 2000.
12. Alpha Respite III: The Enigma of Asset Allocation
Our hero ponders the greatest riddle of all.
