Introduction Overview of investment styles; Empirical evidence on returns of small capitalization firms and value stocks; How to identify investment styles of a mutual fund Characteristic-based style analysis Return-based style analysis Style benchmarks
Fourth Edition Advantages of the Single Index Model Reduces the number of inputs for diversification. Portfolio of 50 assets 50 expected returns;50 variances 1225 covariance. too difficult a task
INVESTMENTS Two-Security Portfolio: Return rp =W+W2r2 W Proportion of funds in Security 1 W2 Proportion of funds in Security 2 =Expected return on Security 1
Types of market efficiency The weak-form of efficiency: price accurately reflect all information that can be derived by examining market trading data such as past prices, trading volume, short interest rate, etc