Table of Contents
1 Cover
2 Preface
4 Part I: Theory 1 Welcome, Harry Markowitz In the Beginning Choose Wisely All Cash Flow Includes Risk Risk Is the Mirror to Return The Surprising Power of Diversification The Sources of Risk and Correlation Markowitz's Open Questions 2 A Sharpe Line Finding a Place on the Efficient Frontier Traveling Along the Capital Market Line Putting a Price on Assets Along the Capital Market Line The Power of Leverage, the Price of Equity, the Value of a Good Manager A Theory that Changed Investing 3 The Counsel of Critics Putting Theory to the Test A Problem with Alpha Performance Turns on More Than Beta Seeds of New Approaches 4 Toward a New Capital Asset Pricing Model A New Focus on Leverage Limits to Leverage More Betting-Against-Beta A Natural Experiment Limits on More Than Leverage 5 The Local Capital Asset Pricing Model Shopping in the Neighborhood Local Markets for Investing Implications of Local Markets Appendix 6 Creating Competitive Advantage Constrained Optimization 7 Building a Portfolio on Competitive Advantage Navigating Future States of the World Return and Risk Goals Anticipating Future States of the World Choosing Among Feasible Investments Putting the Pieces Together From Theory to Application
5 Part II: Practice 8 Investing for Total Return: Mutual Funds The Structure of Mutual Fund Investing Constraints on Mutual Funds Role of Performance Benchmarks Role of the Investment Covenant Mutual Fund as Intermediary Sources of Comparative Advantage Predictions of Local CAPM Pursuit of Scale Narrower and Broader Benchmarks Investing Outside of Benchmarks Relative Value Investing The Quality and Cost of Capital Other Findings Conclusion 9 Investing for Total Return: Hedge Funds The Structure of Hedge Fund Investing A Relative Lack of Constraint on Hedge Fund Investing Role of Performance Benchmarks and Investment Covenants Peculiarities of Reported Hedge Fund Returns Publicly Traded Hedge Funds Sources of Comparative Advantage Predictions of Local CAPM The Formal Literature Conclusion 10 Investing for Banks, Thrifts, and Credit Unions The Structure of Bank Investing Basics of Disintermediation Duration of Equity Duration of Leverage Duration of Net Interest Income Other Forms of Equity The Unique Role of a Bank Investment Portfolio Sources of Comparative Advantage Predictions of Local CAPM