Investment Management: Portfolio Diversification, Risk, and Timing––Fact and Fiction

Praise for Investment Management

"This entertaining and often exciting book is the handbook for investors in search of superior results. No one knows better than Hagin how to combine theory with practice, and I believe there is no other path to superior results."
Peter L. Bernstein, author of Capital Ideas: The Improbable Origins of Modern Wall Street and Against the Gods: The Remarkable Story of Risk

"Bob Hagin is the ultimate ‘poster person’ for the successful marriage of investment theory and practice. Every serious market practitioner should be grateful that Bob has set forth his hard–earned experience and well–grounded theories in such a highly readable volume."
Martin Leibowitz, Vice Chairman and Chief Investment Officer, TIAA–CREF

"...informative, opinionated, insightful with the added virtue of being correct. Bob Hagin is one of the pioneers of quantitative investing, and Investment Management nails the truths and half–truths about investing in the stock market. Not reading this book will put investors and fiduciaries in harm’s way. It is short, sweet, and to the point must reading for all investors and fiduciaries."
Theodore Aronson, Principal, Aronson + Johnson + Ortiz, LP

"What a joy! There are two compelling reasons to own this book: First, it is an immensely practical yet theoretically sound guide to the real world of investment management. Second, it’s lively and amusing, and you will actually enjoy reading it to the end."
Wayne H. Wagner, Chairman, Plexus Group, Inc.

"Investment management is based on a combination of science and wisdom. The science, in turn, is based on scholarship; and the wisdom is based on experience. Bob Hagin’s career in investment management has been based on scholarship and his tenure has provided him experience. The capstone of Bob’s career, Investment Management is replete with both science and wisdom. We could all benefit from Bob’s scientific and wise reflections derived from a long and very successful investment management career."
Frank J. Jones, Professor, Department of Accounting and Finance, San Jose University

PART ONE: Getting Started Your Tool Kit.

CHAPTER 1: Introduction.

CHAPTER 2: What You Need to Know.

CHAPTER 3: Information or Noise?

CHAPTER 4: Intuition.

CHAPTER 5: Random Occurrences.

CHAPTER 6: Law of Small Numbers.

CHAPTER 7: Average Is Average.

CHAPTER 8: Efficient Markets.

CHAPTER 9: Random Walk.

PART TWO: Avoiding Torpedoes.

CHAPTER 10: Perfect Earnings Forecasts.

CHAPTER 11: Can Analysts Forecast Earnings Changes?

CHAPTER 12: Earnings Forecasts (and Torpedo Stocks).

CHAPTER 13: Using Earnings Forecasts.

CHAPTER 14: Size Effect.

CHAPTER 15: Price–Earnings Effect.

CHAPTER 16: The Magic of Growth.

CHAPTER 17: Estimate Revisions.

PART THREE: Landmark Insights.

CHAPTER 18: Nobel Laureate Markowitz.

CHAPTER 19: Nobel Laureate Sharpe.

CHAPTER 20: Compensation for Bearing Risks.

CHAPTER 21: Daring to Be Different.

CHAPTER 22: Law of Active Management.

CHAPTER 23: Nobel Laureate Nash and Keynes.

CHAPTER 24: Nobel Laureates Kahneman and Smith.

CHAPTER 25: What Guides Investors.

PART FOUR: Dissecting Returns.

CHAPTER 26: Luck or Skill?

CHAPTER 27: Measuring Investment Returns.

CHAPTER 28: Anatomy of the S&P 500.

CHAPTER 29: Returns Earned by Investors.

CHAPTER 30: Market Timing versus Asset Allocation.

CHAPTER 31: Market Timing: Risk versus Reward.

CHAPTER 32: Know the Odds Before You Play the Game.

CHAPTER 33: Ten Best Days.

PART FIVE: Putting the Pieces Together.

CHAPTER 34: Trading Costs.

CHAPTER 35: Mutual Funds.

CHAPTER 36: Advantages of . . . .

CHAPTER 37: Style Persistence.

CHAPTER 38: Asset Allocation.

CHAPTER 39: Beware of Taxes.

CHAPTER 40: Beyond Active versus Passive.

CHAPTER 41: Long–Term Capital Management.

CHAPTER 42: To Win the Game.

CHAPTER 43: Highlights.

Notes.

Index.

ROBERT L. HAGIN recently retired as an Executive Director for Morgan Stanley Investment Management. He is a former academic (UCLA and the Wharton School), a thirty–year veteran of the investment management industry, and the author of three books about portfolio management. Hagin is a longtime board member of the Q–Group, Wall Street s premier association of quantitative investment professionals, and has been an editorial advisor to AIMR and to IMCA. He currently designs innovative hedging strategies, publishes his monthly Investing Insights, and consults with public and private pension funds and endowments in the United States and Europe. He is especially well known for his ability to cull academic research for insights that are useful to investment professionals, fiduciaries, and consultants, and to translate these insights into practical action–orientedadvice.