Readings and references in investment strategy and policy, for institutions and individuals who desire to take practical advantage of what is taught in the mainstream of financial economics. Total portfolio approaches; alpha and beta management; strategic asset allocation; manager structure (alpha) optimization; pension actuarial finance. Readings for individual investors, particularly on spending rules and investment risk.
Tuesday, April 2, 2013
Keeping Alpha and Beta Separate: An Active Manager's Utility Maximization Guidepost
I've created a document summarizing the critical lessons taught by Grinold and Kahn in the inexplicably little-known appendix to chapter 4 of their otherwise famous text, Active Management (McGraw Hill, 2nd Edition 2000). This is critical material. Anyone interested in active management, including market timing, should find it interesting--if for no other reason than that it takes the terse and difficult language of the original and puts it in far more approachable form. This document gives an easy-to-follow mathematical understanding of the differences between alpha and beta--and even active beta.Waring's summary of Grinold's and Kahn's Appendix to Chapter 4, book "Active Management"
Posted by Barton Waring at 10:57 AM