Index

  • Absolute illiquidity
    • partial illiquidity, contrast
  • Absolute performance potential outcomes
  • Absorption ratio
  • After-cost improvement
  • Aggressive efficient portfolios
  • Alpha
  • Annual skewness
  • Appraisal-based valuations
  • Arithmetic average returns
  • Asset allocation
    • case study
    • conditions
    • considerations
    • correlations
    • dimensionality, problem
    • fallacy/impact
    • foundation
    • full-scale optimization
    • fundamentals
    • implementation
    • importance
    • policy return, defining
    • relative importance, analytic determination
    • tactical asset allocation
  • Asset class
    • beta, calculation
    • characteristics
    • components
    • conditional asset class performance
    • correlations
    • cost-effective access
    • covariances, estimation
    • defining
    • errors, empirical analysis
    • expected returns
    • expected utility
    • factor diversification, equivalence
    • frontiers
    • geometric returns, average
    • grouping
    • multivariate mixture
    • optimization
    • potential classes
    • quarterly returns, constructions
    • risk
    • risk properties
    • selection skill
    • semi-standard deviations
    • standard deviation
    • transaction costs
    • unstable correlation, multivariate mixture
    • weights
  • Assets
    • combination
    • expected returns
    • mean-variance analysis
    • nonlinear asset dependencies
    • risk, exposure
    • risky assets, conditional annualized returns
    • standard deviations
    • valuation
    • Asset-specific tail distributions
    • Asymmetric preferences
    • At-the-money option, price
    • Autoregressive model
  • Backfill function
  • Backtest performance
  • Bands, statistical significance
  • Basket option
  • Baum-Welch algorithm
  • Bayesian shrinkage
  • Bayes theorem
  • Bayes, Thomas
  • Beebower, Gilbert
  • Bernoulli, Daniel
  • Beta
    • regression beta
  • Black Monday stock market crash (1987)
  • Blended covariance
    • solution
  • Bonds, optimal allocation
  • Bootstrapping simulation
  • Bootstrap simulation
  • Borrowing costs
  • Brexit vote
  • Brinson, Gary
  • Calendar-based rebalancing
    • policies
  • Calendar-based rules, incurring
  • Call option
  • Capital Asset Pricing Model (CAPM)
  • Capital call
  • Capitalization-weighted market portfolio
  • Capital market line
  • Cash demands
  • Central Limit Theorem
  • Certainty equivalents
  • Chi-squared distribution
  • Comovement, aspects
  • Composite instability
  • Compounding, effects
  • Concave utility function
  • Concentrated portfolios, realized return/standard deviation (recording)
  • Concentration
  • Concentration, leverage (contrast)
    • borrowing costs, usage
    • estimation error, usage
    • kinked utility/nonellipticality, usage
    • nonelliptical returns/kinked utility, usage
    • summary results
  • Conditional asset class performance
  • Conservative efficient portfolios
  • Consolidation, impact
  • Constant absolute risk aversion
  • Constant relative risk aversion
  • Constraints
  • Consumption habits, impact
  • Contingent option
  • Continuous probability distribution
  • Continuous returns
  • Corner solutions
  • Correlations
    • country ranking
    • cross-correlation
    • estimation
    • examples
    • ranking
  • Country allocation
  • Country expected returns
    • misestimation
    • ranking
  • Country weights
    • optimum, distortion
    • problems, loss exposure
  • Covariance
    • blended covariance
    • equation
    • invertibility
    • matrix
    • structure
  • Cross-correlation
  • Cross-hedging
    • solutions, Australian dollar (usage)
  • Cumulative cash demands
  • Cumulative probability distribution
  • Cumulative returns
  • Currencies
    • correlations
    • currency forward contract
    • currency-specific hedging
    • expected returns
    • exposure
      • portfolio value percentage
    • impact
    • portfolio currency returns (distribution), hedging strategies (impact)
    • standard deviations
    • volatility
  • Currency risk
    • hedging, reason
  • Currency-specific hedge positions
  • Data-driven estimates
  • Data mining
  • Density
  • De-smoothing adjustment
  • Dimensionality
  • Discrete distributions
  • Discrete probability distribution
  • Discrete returns
  • Distributions
    • central moments
    • elliptical distributions
    • fat-tailed distribution
    • leptokurtic distribution
    • lognormal distribution
    • mixture
    • multivariate distribution
    • normal distribution
    • platykurtic distribution
    • probability distributions
    • stability-adjusted return distribution, construction
    • symmetric distribution
  • Diversification. See Time
    • argument
    • factors, impact
  • Domestic equities, behavior
  • Dynamic programming
  • e (natural logarithm base)
  • Economic indicators
  • Economics
  • Economic variable, out-of-sample behavior (uncertainty)
  • Efficient frontier
    • borrowing/lending, inclusion
    • derivation
    • mean-tracking error efficient frontier
    • mean-variance efficient frontier
  • Efficient portfolios
  • Efficient surface. See also Mean-variance efficient surface
  • Eigenvalue
  • Eigenvector
  • Elliptical assets
  • Elliptical distributions
  • Emerging market equities, returns
  • Empirical analysis
  • End-of-horizon exposure
  • End-of-horizon loss probability
  • End-of-horizon value at risk
  • Equally weighted portfolios, comparison
  • Equilibrium return
  • Error maximization
    • analytical argument
    • argument, intuition
    • empirical argument
  • Error optimization, mean-variance-tracking error optimization
  • Errors, ignoring
  • Estimation error
    • approaches
    • Bayesian shrinkage
    • components
    • empirical analysis
    • resampling
    • robust optimization
    • types
    • usage
  • Euclidean distance
  • Eventual acceptance property
  • E-V maxim
  • Excess return
  • Exchange-traded fund (ETF)
  • Expected log-wealth utility, usage
  • Expected return
    • assumptions
    • changes
    • estimation
    • examples
    • measurement, efficient frontier (usage)
    • ranking
    • shadow allocations, risk
    • shadow asset/liability
    • spread
  • Expected utility
    • maximization
    • time, relationship
  • Expected wealth, example
  • Exponential function
  • Externally heterogeneous (measure)
  • Externally homogeneous asset
  • Factors
    • defining
    • diversification, asset class (equivalence)
    • exposure
    • factor-mimicking portfolio
    • fundamental factor
    • statistical factor
    • term, usage
  • Fair-value pricing
    • downward bias, adjustment
  • Fat-tailed distribution
  • 50/50 portfolio
  • Financial turbulence
  • First passage time probability
  • Fixed-income portfolio, example
  • Foreign asset contingent option
  • Foreign equity returns
  • 45/55 percent stock/bond portfolio, expected utility
  • Forwards, usage
  • Full-sample exposure, regime-dependent exposure (contrast)
  • Full-sample optimal portfolios
  • Full-sample values
  • Full-scale allocations/characteristics
  • Full-scale optimal hedging results, forwards/options (usage)
  • Full-scale optimization
  • Fully hedged portfolio, standard deviation (low level)
  • Fundamental factor
  • Future wealth, dependence
  • Gaussian distribution
  • Genetic search
  • Geometric average returns
  • Global financial crisis (2008)
  • Hardy, G.H.
  • Hedged portfolio, variance
  • Hedge funds, focus
  • Hedge ratios
  • Hedging
    • cross-hedging
    • currency-specific hedge positions
    • extension, reason
    • full-scale optimal hedging results, forwards/options (usage)
    • linear hedging strategies
    • minimum-regret hedge ratio
    • minimum-variance hedge ratio
    • nonlinear hedging strategies
    • overhedging
    • performance, individual quarterly put options (inclusion)
    • reason
    • risk-minimizing hedging policy, identification
    • risk-minimizing hedging ratios
    • strategies, impact
  • Hidden Markov Model
    • effectiveness
    • fit
    • regime probabilities
    • regime probability forecasts
  • Higher moment
  • High-frequency statistics, mapping
  • Hood, Randolph
  • Horizons, impact
  • Identity matrix
  • Illiquid assets, optimal exposure
  • Illiquidity
    • case study
    • cash demands
    • considerations
    • contrast
    • optimal allocations, real estate (inclusions/exclusions)
    • partial illiquidity
    • rebalancing
    • shadow assets/liabilities
  • Imaginary world
  • Independent and identically distributed (IID)
    • continuous returns
  • Independent-sample error (ISE)
  • Individual quarterly put options, usage
  • Industry, instability
  • Information, reliability
  • Initial investment, multiple
  • Input errors, hypersensitivity
  • Integral, term (usage)
  • Intermediate-term bonds, redundancy
  • Internally homogeneous (measure)
  • Internally homogeneous asset
  • Interval error
  • Inverse covariance matrix, scalar multiple
  • Inverse gamma distribution
  • Inverse matrix
  • Invertible matrix
  • Investable asset
  • Investment
    • constraints
    • horizon
    • returns, independence
  • Investors
    • performance, differences
    • risk aversion
  • Iso-expected return curve
  • Jarque-Bera test
  • Kinked utility
    • function
    • usage
  • Kurtosis
    • calculation
  • Lagrange multiplier
  • Lambda
  • Law of large numbers
  • Leptokurtic distribution
  • Leverage
    • practice
    • theoretical use
  • Leverage/concentration, contrast
    • borrowing costs, usage
    • estimation error, usage
    • kinked utility/nonellipticality, usage
    • nonelliptical returns/kinked utility, usage
    • summary results
  • Levered portfolios
    • construction
    • realized return/standard deviation, recording
  • Linear hedging strategies
  • Liquid assets, subset
  • Liquidations, impact
  • Liquidity
    • defensive use
    • impact
    • optimal allocation
    • usage
  • Logarithm
    • natural logarithm
  • Logarithmic returns
  • Lognormal distribution
  • Log-wealth utility function
  • Longer-interval returns, standard deviation
  • Long-interval correlations, dependence
  • Long investment horizon
  • Long-only portfolios
  • Lookback window
  • Loss
    • end-of-horizon exposure
    • end-of-horizon loss probability
    • exposure
    • full-sample exposure, regime-dependent exposure (contrast)
    • probability
    • within-horizon exposure
    • within-horizon loss probability
  • Low-frequency statistics, high-frequency statistics (mapping)
  • Macroefficiency
  • Mahalanobis distance
  • Mapping error (ME)
  • Marginal utility
    • measurement
  • Market portfolio
  • Markowitz, Harry
    • E-V maxim
    • portfolio theory, application
  • Markowitz-Van Dijk (MvD) heuristic
  • Matrix algebra
    • rules
  • Matrix inversion
  • Matrix transpose
  • Maximum Likelihood Estimation (MLE)
  • Mean return
  • Mean reversion
  • Mean-tracking error (MTE) efficient frontier
  • Mean-variance (MV) allocations/characteristics
    • aversion
  • Mean-variance (MV) analysis
    • conditions
    • constraints
    • equivalence
    • investor requirement
    • results
    • robustness
    • tractability
    • usage
  • Mean-variance (MV) approach
  • Mean-variance (MV) efficient frontier
  • Mean-variance-tracking error
    • optimization
  • Metrics, usage
  • Microefficiency
  • Minimax optimization
  • Minimum-regret hedge ratio
  • Minimum-variance hedge ratio
  • Moderate efficient portfolios
  • Modified covariance, equation
  • Moments
  • Momentum portfolios, instability
  • Monte Carlo simulation
    • application
    • usage
  • MSCI U.K. Index
  • Multiperiod optimization
  • Multivariate distribution
  • Multivariate normal distribution
  • MvD rebalancing
  • Natural logarithm
  • NCREIF Property Index, usage
  • Noise
    • reduction
  • Nonellipticality, usage
  • Nonelliptical returns, usage
  • Nonlinear asset dependencies
  • Nonlinear hedging strategies
  • Nonparametric procedure
  • Nonzero autocorrelations/lagged cross-correlations
  • Normal distribution
  • Normalization factor, equation
  • Normative, term (usage)
  • 1/N approach
    • case
    • problems
  • 1/N heuristic
  • Opportunity set (defining), assets (usage)
  • Optimal allocations
    • determination
    • real estate inclusions/exclusions
  • Optimal asset class weights, distortion
  • Optimal country weights, distortion
  • Optimal portfolio
    • variance
  • Optimization
    • arguments
    • defense, empirical evidence
    • failure, occurrence
    • full-scale optimization
    • process
      • constraints
    • robust optimization
    • stability-adjusted optimization
    • stability adjustment improvement
  • Optimized portfolios, comparison
  • Options, usage
  • Out-of-sample tests
  • Out-of-the-money put option, payout
  • Overhedging
  • Overlay
  • Partial illiquidity
    • absolute illiquidity, contrast
  • Performance
    • absolute performance potential outcomes
    • hedging performance, individual quarterly put options (inclusion)
    • relative performance potential outcomes
  • Performance fees
    • adjustment
    • dampening effect
    • optimal allocations
  • Period-specific average returns
  • Platykurtic distribution
  • Playing defense/offense
  • Policy portfolio
  • Portfolio optimization
    • input error hypersensitivity
    • variance
  • Portfolio performance
    • determinants
    • hypothesis
    • methodology, flaw
  • Portfolios
    • comparison
    • concentrated portfolio, construction
    • constraints
    • construction, conditional risk estimates (inclusion)
    • currency returns (distribution), hedging strategies (impact)
    • diversification
      • currency introduction
    • expected utility, improvement
    • factor-mimicking portfolio
    • 45/55 percent stock/bond portfolio, expected utility
    • full-sample optimal portfolios
    • market portfolio
    • misallocation
    • optimal portfolio
    • policy portfolio
    • rebalancing
    • rebalancing approaches, performance evaluation
    • regime-conditioned optimal portfolios
    • risk
    • standard deviation, sensitivity
    • tangency portfolio
    • theory
    • value, currency exposure percentage
    • variance
    • weighted average
  • Positive economics, behavioral bias
  • Positive-semi-definite
  • Positive, term (usage)
  • Posterior probability
  • Power utility function
  • Predictive signal, identification
  • Preference free
  • Price-to-book value ratio
  • Principal Component Analysis (PCA)
  • Principal components
  • Prior-period values
  • Private equity funds, active management
  • Probability density function (PDF)
  • Probability distributions
    • continuous probability distribution
    • cumulative probability distribution
    • discrete probability distribution
  • Put option
  • Quadratic function
  • Quadratic utility, departures
  • Random variable
  • Random walk
  • Real estate investment trusts (REITs)
  • Real estate, optimal allocation (allocations inclusion/exclusion)
  • Realized return, recording
  • Rebalancing
    • absence
    • strategies, performance
  • Regime
    • detection
    • hidden Markov Model regime probabilities
    • hidden Markov Model regime probability forecasts
    • nonturbulent regimes, risk characteristics
    • persistence
    • regime-conditioned optimal portfolios
    • regime-dependent exposure, full-sample exposure (contrast)
    • regime-sensitive allocation
    • risk regimes
    • shifts
    • turbulent/nonturbulent regimes, risk characteristics
    • turbulent regiments, risk characteristics
  • Regression analysis
  • Regression beta
  • Relative importance, determination
  • Relative performance potential outcomes
  • Relative volatility
  • Resampling
  • Return intervals, increase
    • kurtosis, excess, impact
    • skewness, usage
  • Returns
    • arithmetic average returns
    • continuous returns
    • cumulative returns
    • curve, iso-expected return curve
    • data, partition
    • discrete returns
    • distribution
    • equilibrium return
    • estimates
    • excess return
    • expected return
    • geometric average returns
    • predictability
    • scatter plot
    • stability-adjusted return distribution
    • U.S./foreign equity returns
  • Risk
    • constant absolute/relative risk aversion
    • currency risk
    • diversification, time (usage)
    • instability
    • predictability
    • prediction
    • regimes
    • risk-equivalent bias
    • risk-free investment
    • risk-free return
    • risk-minimizing currency positions
    • risk-minimizing hedging policy, identification
    • risk-minimizing hedging ratios
    • within-horizon risk
  • Risk aversion
    • coefficient
  • Riskless arbitrage
  • Risky assets, conditional annualized returns
  • Robust optimization
  • Root-mean-squared error
  • Russian debt default (1998)
  • Sample error
    • independent-sample error
    • small-sample error
  • Sample statistic
  • Samuelson, Paul A.
    • bet
    • dictum
    • rationale
  • Securities
    • asset class grouping
    • returns, comovement (quantification)
  • Security
    • attribute
    • selection
  • Semi-standard deviations
  • Separation theorem
  • 70/30 portfolio
  • 70/30 stock/bond portfolio
  • 75/35 portfolio
  • 75 percent stock portfolio, expected utility
  • Shadow allocations
  • Shadow assets
    • allocation constraint
    • expected return/standard deviation
  • Shadow liabilities
    • allocation constraint
    • expected return/standard deviation
  • Sharpe algorithm
  • Sharpe ratio
  • Sharpe, William
  • Simulation
    • techniques
    • usage
  • 60/40 portfolio
    • return distribution/expected log-wealth utility, usage
    • shift
  • 65/35 portfolio
  • Skewness
    • annual skewness
    • usage
  • Small-sample error
    • equation
  • Smoothed probabilities
  • Smoothing
    • de-smoothing adjustment
    • valuation smoothing
  • Sortino ratio
  • S-shaped utility curve
  • S-shaped utility function
  • Stability-adjusted optimization
  • Stability-adjusted portfolios
  • Stability-adjusted return distribution
  • Stability-adjusted return sample
  • Stability optimization, mean-variance approach
  • Stable aggregation
  • Standard deviations
    • assumptions
    • country ranking
    • estimation
    • examples
    • function
    • low level
    • portfolio standard deviation, sensitivity
    • ranking
    • scales
    • shadow asset/liability
  • Standard normal variable
  • Statistical factor
  • Stocks
    • allocation, expected utility
    • optimal allocation
    • portfolio (75 percent), expected utility
  • Suboptimality costs
  • Subsample
    • pairs
    • testing
  • Swiss franc, safe-haven currency
  • Symmetric distribution
  • Systematic risk
  • Tactical asset allocation
    • investor engagement
    • out of sample test
  • Tangency portfolio
  • Taylor series
    • approximations, usage
  • Time
    • diversification
      • preference-free contradiction
    • expected utility, relationship
    • horizon, adjustment
    • square root, calculation
  • Tolerance band rebalancing
  • Total covariance error
  • Total portfolio contingent option
  • Tracking error
    • aversion
  • Trading costs
  • Transaction costs (TC)
  • Transitioning
  • Turbulence
    • equation
    • turbulence-conditioned covariance matrix
  • Universal hedge ratio
  • Upside deviations, downside deviations (distinction)
  • Upside returns, investor preference
  • U.S. equities
    • monthly correlation
    • returns
  • U.S. market equities
    • five-year returns
    • monthly returns
  • U.S. Treasury bonds, monthly correlation
  • Utility function (U)
    • alternatives
    • concave utility function
    • kinked utility function
    • log-wealth utility function
    • power utility function
    • S-shaped utility function
  • Utility theory
  • Valuation smoothing
    • optimal allocations
  • Value at Risk (VaR)
    • end-of-horizon value at risk
    • measurement
    • within-horizon value at risk
  • Variance
    • square root, usage
  • Volatility
  • Wealth
    • dependence
    • distribution
    • utility
  • Weights
    • sensitivity
    • vectors
  • Within-horizon losses
    • probability
  • Within-horizon probability
  • Within-horizon risk
  • Within-horizon value at risk
  • Work effort, impact
  • Wrong and alone, term (usage)
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