MSc Investment Management

Portfolio Management

Lecture 2 February, 1st, 2012

Lecture 2
Tactical Asset Allocation Style Investing, Style Rotation, Tactical Asset Allocation with Styles and Sector Rotation

February, 1st, 2012

Tactical Asset Allocation

Tactical Asset Allocation (TAA)

Strategic (SAA) portfolio is a benchmark portfolio for TAA decisions. TAA assumes systematically deviating from SAA in the shortrun, in response to changing market and economic conditions It is a contrarian approach that relies on the idea of long-term mean reversion (return to equilibrium)
Sell asset classes that have strengthened; i.e., in time of bubble Buy asset classes that have weakened; i.e., in time of panic

More on Tactical Asset Allocation

Portfolio weights change frequently (every month, quarter, year)
Combines intuition (market timing) with objective quantitative models (forecasting models, mean-variance optimisation with imposed restrictions on tactical deviations from benchmark weights) Main objective: alter positions in asset classes to obtain return above the return expected from SAA positions Therefore, it is consistent with active portfolio management and market inefficiency

TAA Simple example

Assume that SAA decision is to invest 70% in UK equities and 30% in UK gilts. Asset allocator view: gilts are currently overvalued, equities are undervalued
TAA decision: sell 5% of gilts and invest 5% more in equities

If the view is correct, equities will rise in value, gilts will fall:

So, new TAA decision will be to sell additional equity bought and buy back the gilts going back to the strategic position of 70/30 split between the two asset classes

Value is added to the portfolio by:

1) increasing exposure to equities that rose in value and 2) decreasing exposure to gilts that fell in value
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Is SAA more important than TAA?

For most institutional investors the more important decision is the strategic one. Example: SAA for investor A is 70/30 and investor B 50/50. TAA decision changes the weights split for Investor A to 71/29 and for Investor B to 49/51. Positions are held over 1 year in which equities fall by 30% and bonds rise by 10%. The SAA and SAA+TAA performance for each investor is then:
Strategic benchmarks Investor A Investor B TAA over/under weights Investor A Investor B 1% -1% Investor B -10.0% -9.6% 0.40%
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Asset class performance -30% 10%

Panel A
Equities Bonds 70% 30% 50% 50% -1% 1%

Panel B

Investor A Performance SAA only -18.00% Performance SAA and TAA -18.40% Difference -0.40%

Which form of AA has greater contribution to the variance of total returns and determination of portfolio performance?
TAA and Security Selection 6.4%

SAA 93.6%

Brinson, Hood and Beebower (1986), many other studies confirm these findings
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Global Asset Allocation (GAA)

International portfolio diversification (IPD) Additional profits opportunities for the same risk; i.e., improve risk adjusted performance compared to local asset allocation Prerequisite: Some independence in price behaviour across countries (Average correlation between two country returns < 1) Domestic diversification argument extended to a larger cross section of fairly independent assets

GAA: Correlation coefficients between markets vary over time, but they are far from +1:

Standard deviations and correlations are not constant: They rise in periods of 10 recession

GAA: US investor reduces risk by investing abroad

Total risk 100%

27% 11.7%

US Stocks Global Stocks

10

20

30

# of stocks

Half of the US systematic risk is unsystematic at the global level Source: B.Solnik, 1995, Financial Analyst Journal, Why not diversify internationally rather than domestically?
11

International efficient frontier for stocks and bonds

Source: Odler and Solnik, 1993, Financial Analyst Journal: Lessons for International Asset Allocation
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GAA in practice: Home Country bias allocation

Shares mostly held by domestic investors Why do investors avoid foreign shares? Constraints and perceived misconceptions:
Lack of familiarity with foreign markets and cultures Regulations and political risk Lack of liquidity on foreign assets Currency risk Transaction costs Rising and time-varying correlations

Home bias at home: Local UK fund managers tend to invest more in firms geographically located near the home of the fund!
See UK fund managers equity allocation chart by region on next slide
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GAA, home bias: UK equity allocation by region

(source IMA 2009)
8.4% 4.7% 8.1% 47.1% 13.7% 1.0%
UK Europe (ex UK) US Pacific (ex Japan) Japan Emerging Markets Other

17.0%

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Benefits of GAA (IPD) Country Effect?

Low correlation between indices because economic shocks have different effects across countries
Local shocks Different responses of national markets to global shocks

Example: The Swiss, Norwegian and Indonesian stock indices are imperfectly correlated because each country is subject to independent, country-specific shocks and not because Swiss has more banks, Norway more energy/oil and Indonesia more rubber companies Implication for GAA
Allocate portfolio weights to different countries Select the most attractive stocks in each country
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Benefits of GAA (IPD) Sector/Industry Effect?

Although there is trend in increasing cross-country correlations, there are still benefits of IPD when country indices with lower correlation are identified
Low correlation between country indices because countries are specialised in specific industries and these industries are imperfectly correlated IPD benefits are in sector rather than country effect diversification

Example: An investment in the stock indices of Switzerland, Norway and Indonesia represents a disproportionate bet on banking, energy and rubber stocks respectively. The Swiss, Norwegian and Indonesian stock indices are imperfectly correlated because the banking, energy and rubber industries do not move exactly in tandem Implication for GAA
Allocate portfolio weights to different industries Use industry analysts to select the most attractive stocks in each 16 sector

Benefits of GAA Country or Industry Effect?

Baca, Garbe and Weiss (2000)

USD monthly returns on 7 developed countries and 10 sectors indexes In a given month split total return cross-sectionally into common market influence (), sector component (jIj), industry component (jCj) and error term ( i):

Ri i 1I1 .... 10I10 1C1 ... 7C7 i

Where:
Ri = 70 returns of the 10 industries within each of the 7 countries = Constant, represents common influence to all indices jIj = Sector (Industry) component of return (Ij is an industry dummy equal to 1 if the return belongs to industry j and 0 otherwise) jCj = Country component of return (Cj is a country dummy equal to 1 if the return belongs to country j and 0 otherwise)
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Benefits of GAA Country or Industry Effect?

Baca, Garbe and Weiss (2000) Regression estimated every month from 1979-1999: Generates time series of and Compute variances of the country and industry effects over time using rolling 48-month time periods Relative importance of countries and sectors over time: Country effect no longer dominates industry effect
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Benefits of GAA Country or Industry Effect?

Baca, Garbe and Weiss (2000)

Supports the notion of increasing market integration

Decline in trade barriers
On-going expansion of large multinational companies Emergence of large economic blocks (European Community and the EMU, North American Free Trade Agreement, Association of Southeast Asian Nations)

Implication for GAA

Until the mid to end 90s, allocate portfolio weights to different countries and select the most attractive stocks in each country
Country-orientated approach to global equity management is now less effective. Global industry factors constitute an increasingly important dimension of investment strategy
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Insured AA: Constant Proportion Portfolio Insurance (CPPI)

Dynamic asset allocation strategy that involves market timing
Re-allocation of funds between equities and money market instrument (T-bill for example) Feasible only if: reallocations are made frequently and if transaction costs are low; also, there should be continuity in equity prices It can be illustrated through the formula: E = m (V F)
where E is value of equity, V is value of equity and bond portfolio, F is a floor value of a portfolio, (V-F) is called a cushion and m is a multiplier 20

CPPI Example
Value of a portfolio V=100m Floor F= 75m Multiplier m=2 Level of market Index 3000 Then, Equity = 2x(100-75) = 50m and Bonds = 50m
If index level falls to 2900 or 3.3% it means that value of equity will fall by 3.3% to 48.33m and the cushion will fall to 23.33m (C = 98.33-75)
Appropriate stock position is now: 46.67m (=2x23.33), meaning that we should sell 48.33-46.67 = 1.67m of equity and place it into bonds For summary of different scenarios refer to the next slide
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Index 3000 2900 2800 2700 2600 2500 2400 2300 2200 2100 2000 1900 1800 1700 1600 1500 1400 1300 1200 1100 1000 900 800 700 600 500 400 300 200 100 0

I1/I0 0.966667 0.965517 0.964286 0.962963 0.961538 0.96 0.958333 0.956522 0.954545 0.952381 0.95 0.947368 0.944444 0.941176 0.9375 0.933333 0.928571 0.923077 0.916667 0.909091 0.9 0.888889 0.875 0.857143 0.833333 0.8 0.75 0.666667 0.5 0

E1 48.33333 45.05747 41.89655 38.85057 35.91954 33.10345 30.4023 27.81609 25.34483 22.98851 20.74713 18.62069 16.6092 14.71264 12.93103 11.26437 9.712644 8.275862 6.954023 5.747126 4.655172 3.678161 2.816092 2.068966 1.436782 0.91954 0.517241 0.229885 0.057471 0

V 100 98.33333 96.72414 95.17241 93.67816 92.24138 90.86207 89.54023 88.27586 87.06897 85.91954 84.82759 83.7931 82.81609 81.89655 81.03448 80.22989 79.48276 78.7931 78.16092 77.58621 77.06897 76.6092 76.2069 75.86207 75.57471 75.34483 75.17241 75.05747 75 75

C 25 23.33333 21.72414 20.17241 18.67816 17.24138 15.86207 14.54023 13.27586 12.06897 10.91954 9.827586 8.793103 7.816092 6.896552 6.034483 5.229885 4.482759 3.793103 3.16092 2.586207 2.068966 1.609195 1.206897 0.862069 0.574713 0.344828 0.172414 0.057471 0 0

E 50 46.66667 43.44828 40.34483 37.35632 34.48276 31.72414 29.08046 26.55172 24.13793 21.83908 19.65517 17.58621 15.63218 13.7931 12.06897 10.45977 8.965517 7.586207 6.321839 5.172414 4.137931 3.218391 2.413793 1.724138 1.149425 0.689655 0.344828 0.114943 0 0

B 50 51.66667 53.27586 54.82759 56.32184 57.75862 59.13793 60.45977 61.72414 62.93103 64.08046 65.17241 66.2069 67.18391 68.10345 68.96552 69.77011 70.51724 71.2069 71.83908 72.41379 72.93103 73.3908 73.7931 74.13793 74.42529 74.65517 74.82759 74.94253 75 75

E/V 0.5 0.474576 0.449198 0.423913 0.398773 0.373832 0.349146 0.324775 0.300781 0.277228 0.254181 0.231707 0.209877 0.188758 0.168421 0.148936 0.130372 0.112798 0.09628 0.080882 0.066667 0.053691 0.042011 0.031674 0.022727 0.015209 0.009153 0.004587 0.001531 0 0

22

23

CPPI important issues

Value of the multiplier depends on the volatility of the underlying equity market. Multiplier indicates that the index can drop by 1/m and the value of the portfolio will not fall below floor even without rebalancing
In our example index could have fallen by =50% before we would make any losses without any rebalancing

Strategy works well in rising market but in a flat market, due to reversals, substantial transaction costs are generated
Cost of the strategy can be reduced by using futures contract for stock market index and bonds rather than actual assets

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Insured AA concluding remarks

Assumes that expected returns, risks and correlations remain the same during the period of insurance Assumes that investors risk aversion is highly sensitive to the value of assets: the higher that value, the lower risk aversion and more aggressive asset mix is expected (and vice versa). If the asset value falls to the floor, risk tolerance becomes zero, and optimal choice for investor is then least risky one (Tbill). Unlike TAA, insured AA does take into account possible changes in investors risk tolerance but it does not account for changes in expected returns, variances and correlations (capital market prospects) Applying both TAA and insured AA is beneficial
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Performance Attribution Return Decomposition Analysis

Attributes performance vs. Benchmarks Can focus on asset allocation (top/down approach) or selection (bottom up approach) Easy to calculate ( requires benchmark and portfolio returns and weights) Easy to understand and explain

Widely accepted in industry

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Active Management Effect

Active management effect is the total value added to a portfolio return. It is the difference between the total portfolio return and total benchmark return. Total value added is obtained as the sum of the following investment decisions or effects: asset allocation, selection and interaction.
Total Value Added is the sum of:

Allocation Effect

Selection Effect

Interaction Effect
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Asset Allocation Effect

Measures portfolio managers ability to effectively allocate the assets to various market segments
Positive allocation effect: portfolio is overweighted in a segment that outperforms the benchmark and underweighted in a segment that underperforms the benchmark
Negative allocation effect: portfolio is overweighted in a segment that underperforms the benchmark and underweighted in a segment that outperforms the benchmark

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Selection effect
The selection effect measures the investment managers ability to select securities within a given asset class relative to a benchmark. The over or underperformance of the portfolio is weighted by the benchmark weight, therefore, selection is not affected by the managers allocation to the asset class. The weight of the asset class in the portfolio determines the size of the effect (the larger the segment, the larger the effect is, positive or negative).

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Interaction Effect
The interaction effect measures the combined impact of an investment managers selection and allocation decisions within an asset class. For example, if an investment manager had superior selection and overweighted that particular asset class, the interaction effect is positive. If an investment manager had superior selection, but underweighted that segment, the interaction effect is negative. In this case, the investment manager did not take advantage of the superior selection by allocating more assets to that segment.

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Calculating Performance Attribution, Brinson et. al (1986)

Security Selection Actual Portfolio Actual Portfolio Asset Allocation Passive (benchmark) Passive (benchmark)

Quadrant IV: Actual Portfolio Return

Quadrant II: Policy and Active Asset Allocation Return

a ,i

Ra ,i

a ,i

Rb,i

Quadrant III: Policy and Security Selection Return

Quadrant I: Policy Return (Passive Portfolio Benchmark)

b ,i

Ra ,i

Where: Wa,i = actual portfolio weight for asset class i, Wb,i = benchmark weight for asset class i; Rb,i = passive benchmark return for asset class i and Ra,i = actual portfolio return for asset class i

b ,i

Rb,i

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Calculating Performance Attribution, Brinson et. al (1986)

Return contributed to Active Asset Allocation effect Security Selection effect Interaction effect Total value added Calculated as Quadrant II-I: (wa,i Rb,i wb.i Rb,i ) Quadrant III-I: (wb,i Ra,i wb,i Rb,i ) Quadrant IV-II-III+I [(wa,i wb.i )(Ra,i Rb,i )] Quadrant IV I: (wa,i Ra,i wb,i Rb,i )

Note: attribution effects in this model are defined as total on a fund/portfolio level and breakdown of those totals into segments (equity, bonds etc.) in this model is not possible
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Calculating Performance Attribution, the example

Step 1: Establish the benchmark level of performance against which actual portfolio performance is compared. Benchmark portfolio is passive (meaning: 1)allocation of funds across asset classes in the benchmark is set as usual allocation and 2) within each asset class manager invests in an index portfolio). Any departure from actual portfolio returns from this passive benchmark is due to allocation effect, security selection effect or both. If we know that the return of the active managed portfolio is 5.34%, then we have:

Table 1: Benchmark Performance Component Asset Class Benchmark weight Return of Index (%) Equity Index 0.60 5.81 Bond Index 0.30 1.45 Cash 0.10 0.48 Benchmark return = 0.6 5.81+0.3 1.45+0.1 0.48 = 3.97% Excess Return of active managed portfolio = =Return of active managed portfolio Return of the benchmark = 5.34 - 3.97

= 1.37%

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Calculating Performance Attribution, the example

Step 2: Composition of the active managed portfolio is different from the benchmark (70/7/23 vs. 60/30/10), which can lead to superior/inferior performance due to 1) Asset allocation or 2) Security Selection Table 2: Asset Allocation Effect Benchmark Excess Benchmark weight weight Return (%) (2) (3) (4) 0.60 0.10 5.81 0.30 -0.23 1.45 0.10 0.13 0.48

Asset Class Equity Bond Cash

Active weight (1) 0.70 0.07 0.23

Allocation Effect (3) x (4) 0.5810 -0.3335 0.0624

Total contribution of asset allocation effect:

0.3099%
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Calculating Performance Attribution, the example

If return of equity and bonds in our active managed portfolio are 7.28% and 1.89%, then security selection effect can be computed as: Table 3: Security Selection Effect
Asset Class Equity Bond Cash Active Benchmark performance performance (1) (2) 7.28 5.81 1.89 1.45 0.48 0.48 Excess performance (3) 1.47 0.44 0.00 Benchmark weight (4) 0.60 0.30 0.10 Selection Effect (3) x (4) 0.882 0.132 0.000

Total contribution of Security Selection Effect:

1.014%
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Calculating Performance Attribution, the example

Step 3: Interaction effect
Table 4: Interaction Effect Excess portfolio Excess portfolio performance weight (1) (2)

Asset Class

Interaction Effect (1) x (2)

Equity 1.47 0.10 Bond 0.44 -0.23 Cash 0.00 0.13 Total contribution of Interaction Effect:

0.147 -0.101 0.00

0.0458%

Step 4: Active management effect = Allocation + Selection + Interaction =

= 0.3099 + 1.014 + 0.0458 = 1.3697% ~ 1.37%
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We can calculate the source of performance within each asset class. Let us look at allocation of funds within equity for example:
Table 5: Sector Allocation Contribution Beginning of period weights
Sector
Active portfolio (1) Benchmark portfolio (2) Weights difference (3) Sector return(%) (4) Sector Allocation effect (3) x (4)

Banks Energy IT Utilities Auto Pharma Beverages Travel Total

0.0196 0.0784 0.0187 0.0847 0.4037 0.2401 0.1353 0.0195 1.0000

0.083 0.041 0.078 0.125 0.204 0.218 0.142 0.109 1.000

-0.0634 0.0374 -0.0593 -0.0403 0.1997 0.0221 -0.0067 -0.0895 0.0000

6.9 7.0 4.1 8.8 10.0 5.0 2.6 0.3

-0.437 0.262 -0.243 -0.355 1.997 0.111 -0.017 - 0.027

1.290%
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Calculating Performance Attribution

(a little bit extra.summing up all component effects) 1. Asset Allocation (from Table 2): = 0.3099 2. Security Selection (from Table 3&5): a) Equity Excess return: i) Sector Allocation 1.29% ii) Security Selection in sector 0.18% (=1.47%-1.29%) 1.47% x 0.6 (benchmark weight) = 0.882 b) Bond Excess Return: 0.44% x 0.3 (benchmark weight) = 0.132 3. Interaction (from Table 4): = 0.0458 Total excess return of active portfolio(1+2+3) = 1.37%

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Reading
Baca, S., Garbe B and R. Weiss, The rise of sector effects in major equity markets, Financial Analysts Journal, Sep / Oct 2000, 34-40 Bodie, Kane and Marcus, Essentials of Investments, pp 593-598 on Performance Attribution Black F. and Litterman, R. (1992) Global Portfolio Optimisation, Financial Analysts Journal, September/October 1992 Brinson, G., Hood R. and G. Beebower (1986), Determinants of Portfolio Performance, Financial Analysts Journal, July/August 1986. Brinson, G. Singer B and G. Beebower (1991), Determinants of Portfolio Performance II: An Update, Financial Analysts Journal, May/June 1991. Dahlquist, M. and C. R. Harvey (2001), Global Tactical Asset Allocation, The Journal of Global Capital Markets, Spring 2001. Elton, E, Gruber, M, Brown, S and W. Goetzmann, Chapter 10 on International Diversification in 8th edition Modern Portfolio Theory and Investment Analysis, Wiley Hood, R. (2005), Determinants of Portfolio Performance 20 years later, Financial Analysts Journal, September/October 2005. Idzorek, T(2010), Asset Allocation is King, Morningstar Advisor, April/May 2010.
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Style Investing, Style Rotation, Tactical Asset Allocation with Styles and Sector Rotation

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Security Selection- Stock Screening

Alpha-based portfolio construction
Definition of alpha: excess return intercept in the equation below

( E ( Ri ) R f ) iM iM ( E ( RM ) R f ) iM
Positive (and statistically significant) alpha is the aim of active strategist Alphas diminish with diversification Suppose that you hold a portfolio consisting of the FTSE 100 index. Examine whether gold should be included in the portfolio or not. r g 0.0009 0.17119r FTSE
(0.545)
2 R 0.0333

(2.0892)

Hint: One way of testing whether an asset should be included in the portfolio is to run a regression of asset returns (gold returns) on the existing portfolio returns (FTSE 100 returns), and test the significance of intercept under the null hypothesis:

H o : 0

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The Determinants of Alphas

It has already been noted that stocks and portfolios with positive alphas outperform the market. The question is why?
Empirical tests have shown that alpha is a proxy for some other variables that determine excess returns, such as dividend yield, size, P/E ratio, Market-to-Book ratio, sales growth, leverage, earnings-toprice ratio etc.

If there is a sufficient commonality in managers investment philosophies, portfolio characteristics and subsequent returns of those portfolios, the type of investing is labeled a style. The existence of style is confirmed by seeing if consistent patterns of returns follow from the style, both in the form of the performance of indexes of stocks selected using a style characteristics and in the average returns of managers following the style.
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Stock screening
The first stage in any quantitatively driven investment process: identify which stocks or sectors meet certain financial criteria, i.e. which ones to over or under weight
The aim is to over weight the stocks that are expected to do well according to the criteria set for screening and vice versa

Many approaches: from detailed fundamental or technical analysis involving extensive human judgement to highly computer-driven techniques with very limited human intervention Computer-based stock screener has three components:
1) a database of companies, 2) a set of variables by which to screen the companies 3) and a screening engine (model) that compares companies to the variables and generates a list of matches
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Example of the Screen

Say we are looking for a bank that trades on NYSE, has a PE ratio under 25, has revenue growth of 25% and profit margins at least 15%. Once the screening filter is implemented, we obtain:

Type of Screen
Look in banking industry Trading on NYSE PE ratio under 25 1 yr revenue growth at least 25% Profit Margin of at least 15%

Companies Remaining
704 97 84 18 3

Note: the three companies that made all our criteria are not necessarily the best buys; they are only as valuable as the searching criteria we enter in the screener Predefined screens: set up for screening stocks according to popular 44 investment strategies

Limitations of Screens
Most include only quantitative factors
No screen provides information on customer satisfaction levels, pending law suits, labour problems etc. Technical analysis indicators (chart patterns) are not covered by screens

Screeners use databases that update on different schedules use updated information
Especially important for pre determined screens

Watch for industry specific blind spots

If you are searching for low PE valuations, dont expect many tech companies to show up

Overall, screens are great for narrowing options but they should not replace completely detailed research

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Style Investing

46

Classification of Equity Investment Styles

Investment styles have emerged because there is evidence that groups of stocks which have one or more common characteristics show tendency to move together Value
cheap, low P/E, low market-to-book, high yield stocks

Growth
more expensive, consistent earnings growth strategy, earnings momentum strategy

Blend
more diversified portfolio value biased or growth biased

Small Cap
investing in small cap companies has historically been a popular style with mutual funds and investment trusts in the last 10 years evidence that small companies underperform large
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Value Style
Value investors are interested in the price component of P/E ratio they buy at low Price relative to Earnings of the company, expecting that the price will rise during the investment horizon enabling them to generate profits
Approach based on low market valuation of stocks at the time of distress for a company contrarian's approach

Value investors are short-term investors, with high income (dividend yield) expectations Historically, value stocks have on average outperformed growth Some explanations offered to explain this phenomenon which is regarded as market anomaly:
Higher risk associated with low P/E ratio stocks Explained by another anomaly: e.g. small size Poor assessment of the growth prospects of the company Examples: utilities, banking sector, cyclical stocks
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Growth Style
Growth style is more pragmatic and less clear defined than value Growth investors are interested in the earnings component of the P/E ratio Consistent growth strategy: investing in stocks that have consistent earnings growth rate, usually reasonably priced Earnings momentum strategy: investing in companies that have recently experienced large increase in earnings growth aggressive approach to growth investing Investors are expecting that the company will increase earnings in the future which will in turn be reflected in rise in price, hence the returns can be generated

Growth investors are long-term investors, expecting no or low income and high growth of the company
Examples: technology, IT, pharmaceutical sector
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Growth and Value Style

Appear to be mutually exclusive because investors have different risk profile and different emphasis but there is an overlap:
A few growth managers would claim they buy expensive stocks and many value managers will include in their portfolio a cheap stock with good growth prospects Only in their extreme forms these styles are at the opposite end of investment spectrum Large number of stocks of on the market exhibits both value and growth characteristics

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Historical Performance of Value and Growth in the UK, 1965-2003: Value outperforms Growth
45000

40000

35000

30000

25000

Value VG GV

20000

Grow th

15000

10000

5000

Jan-65

Jan-67

Jan-69

Jan-71

Jan-73

Jan-75

Jan-77

Jan-79

Jan-81

Jan-83

Jan-85

Jan-87

Jan-89

Jan-91

Jan-93

Jan-95

Jan-97

Jan-99

Jan-01

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Value anomaly: The international evidence

39.8%
40%

35%

30%

Average Excess Return

25%

22.9% 17.9% 13.3% 14.6% 14.8%

20%

16.9%

15%

10%

7.8% 4.6%

6.8%

7.1% 6.8%

5%

0%

UK (1975 - 1995)

US (1975 - 1995)

Developed Markets (1975 - 1995)

Emerging Markets (1987 - 1995)

Value Premium

Value (Low P/B)

Growth (High P/B)

Source: Fama and French (1998)

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REASON (1) Why value outperforms growth: Poor Assessment of growth

prospects of the company Biased reaction to earnings announcements
Annualised Market Adjusted Holding Period Returns, All Positive Surprises 1973-93
25
Return (%)

Annualised Market Adjusted Holding Period Returns, All Negative Surprises 1973-93
5
Return (%)

20 15 10 5 0 1 2 3 Quarter 1 4 5 One Year 6

0 -5 -10 -15 -20 Quarter 1 One Year 1 2 3 4 5 6

Pillars 1&4 - Low PE; Pillars 2&5 - Mid PE; Pillars 3&6 - High PE

Pillars 1&4 - Low PE; Pillars 2&5 - Mid PE; Pillars 3&6 - High PE

It pays to hold stocks that have experienced recent large positive earnings surprises, the market takes 3 quarters to adjust to the good news A Long / short investment strategy is possible
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REASON (2) Why value outperforms growth: Value stocks have higher risk Beta as a measure of market risk DOES NOT SUPPORT THIS
1.2 1 1 0.91 0.87 0.86 0.95 0.90 0.88 1 1.01 1.1

Beta: Measure of Market Risk

0.8

0.6

0.4

0.2

0 P1 - Low P/B: Value P2 P3 P4 P5 P6 P7 P8 P9 P10 High P/B: Growth

Portfolios Sorted on Price to Book Value

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REASON (3) Why value outperform growth: Is the value premium another proxy for the size premium? It looks like it
1,400 1,317.24

1,200 969.78 803.38 800 665.70 605.93 600 479.30 435.37 400 278.44 200 146.09 352.45

Market Value ($ millions)

1,000

0 P1 - Low P/B: Value P2 P3 P4 P5 P6 P7 P8 P9 P10 High P/B: Growth

Portfolios Sorted on Price to Book Value

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What if a stock is neither value nor growth? Growth at Reasonable Price (GARP) stocks
There are investors who want to have a cheap stock with a good growth potential GARP investors typically relate P/E ratios to growth rates:

PE GARP Growth Rate in Earning

Imagine 4 stocks with P/Es of 10, 20, 30, 40 and growth rates of 8%, 20%, 20% and 30%. The GARP ratios would be 1.25,1,1.5 and 1.33 respectively. The stock with P/E of 20 would be the cheapest although it is neither the lowest P/E or highest growth stock. Is it growth or value then? GARP is neither pure value tool nor pure growth tool and lies somewhere in between
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Small Cap Style

Investing in small capitalisation stocks which can be defined as the smallest decile (bottom 10%) of the stocks in terms of market capitalisation Different institutional investors may alter this definition where small cap would be bottom 25% or 30% of the market cap Historically, on average, small stocks outperform large but the volatility in the small size effect is high There is evidence that it exhibits cyclical behaviour so that small outperforms large for a number of years and then large outperforms small Explanations offered for this phenomenon: small cap stocks are usually low price, neglected, low liquidity stocks with higher betas and seasonal behaviour Not enough clear cut evidence to support validity of these explanations
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10000

1000

2000

3000

4000

5000

6000

7000

8000

9000

Jan-65 Jan-66 Jan-67 Jan-68 Jan-69 Jan-70 Jan-71 Jan-72 Jan-73 Jan-74 Jan-75 Jan-76 Jan-77 Jan-78 Jan-79 Jan-80 Jan-81 Jan-82 Jan-83 Jan-84 Jan-85 Jan-86 Jan-87 Jan-88 Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02

ML

MS

Small

Historical Performance of Small and Large Caps in the UK, 1965-2003

Large

58

Size anomaly: The international evidence

15%
14%

11.4% 10.3% 10.7%

11%

10%

Mean Return

8.5%

8.7%

6.4%

6.6%

5%

0% UK (1955 - 1999) Canada (1950 - 1987) Germany (1954 - 1988) Japan (1971 - 1992)

Micro-Cap Equities

Low-Cap Equities

All Equities

Source: Dimson and Marsh (2001)

59

Selecting stocks for Style Portfolios: e.g. Value and Growth stocks
Pick a universe of stocks (e.g FTSE 100)

Calculate (or obtain from a data source) a P/E ratio for each one
Sort stocks according to P/E ratio in ascending order

Pick stocks from the top of the list until you have 50% of total number - this represents your value stocks, the rest are growth stocks
Problem with this method: stocks which are neither pure value nor pure growth are included Need for creating minimum three portfolios and very often even more

Alternative stock characteristics used to define style: P/B ratios, dividend yields, earnings growth estimates, etc.

60

The value anomaly persists irrespectively of the proxy used for value here, portfolios are constructed based on dividend yield:

12% 10.1% 10% 10.6% 8.9% 8.5% 7.6%

Average Excess Return / Alpha

8.6% 8% 6% 4.1% 4% 4.4%

8.3% 7.3%

8.3%

8.1%

4.4% 2.4% 1.7%

2% 0.4% 0% -2% P1: High DY: Value P2 P3 P4 P5 P6 P7

1%

0.5% -0.5% -0.5%

P8

P9

P10: Low DY: Growth

Portfolios Sorted on Dividend Yield Average Excess Return Alpha: Average Excess Return Not Explained by Risk

61

Proxy for value: here, portfolios are constructed on the basis of Price to Earnings ratio value anomaly still persists

16% 14%

15.3% 13.1% 12.8% 11.4% 10.1%

Average Excess Return / Alpha

12% 10% 8% 6% 4% 2% 0% -2% -4% P1: Low P/E Value P2 P3 7.6% 6.1%

7.8% 6.1% 4.8% 3.3%

8.1%

7.8% 5.8% 5.7%

0.7%

1.1%

0.7%

-1.7%

-3.1%

P4

P5

P6

P7

P8

P9

P10: High P/E Growth

Portfolios Sorted on P/E Ratio

Average Excess Return

Alpha: Average Excess Return Not Explained by Risk

62

Defining the styles using style mathematics

CAPM theory suggests: the return on a stock/portfolio is dependent on the market return which can be observed through the beta coefficient:

R i t i t i t R M i t
Style mathematics can be viewed as a version of Fama-French 3factor model: take 60 consecutive observations of monthly return for a given stock/portfolio and regress them against monthly market index and style index returns for the same period to generate style betas:

R s,t s,t s, M R M s,value R value s,growth R growth s,l arge R l arge s,smallR small s,t
63

Defining the styles, cont.

Independent variables in the model above are highly correlated: leads to unstable coefficients As a result, the modification of the previous model is needed:

R s,t s,t s, M R M s,gv R growthvalue s,ls R l argesmall s,t

BETA g-v = sensitivity of a given stocks/portfolios return to the difference between the growth and the value index
if the value of this beta is positive and significant - the stock is a growth stock and vice versa

BETA l-s = sensitivity of a given stocks/portfolios return to the difference between the large and the small index
if the value of this beta is positive and significant - the stock is a large stock and vice versa
64

Morningstar style box

VALUE Large (top 70%) BLEND GROWTH Lowest risk Medium risk Medium (Next 20%) Highest risk

Small (Bottom 10%

65

Use of Style Betas

Helps to determine if a company is a pure value/growth/small/large company helps to avoid misclassification of securities

Shows the evolution of a company/sector or portfolio over time

Some sectors may have been growth and they became value or they may have been small and they became large over the years

Enables finding stocks suitable for pairs trading

Style indices serve as a proxy for risk Two stocks that have the same sensitivity to the styles should have the same returns

66

Benchmarks for performance measurement

Key issue in choosing benchmark: if replicated in a fund, the funds objective is likely to be met and it will reflect the risk profile of your funds strategy Construction of style indices such as, FTSE High Yield, FTSE Small Cap has improved over the years and more style benchmarks are available nowadays making them a better guide to performance measurement Some fund management firms believe that some style indices are too narrowly based, reflecting pure value/growth style for example and hence cant be used as useful benchmarks for broader funds which include grey area stocks Style returns often used for benchmarking in US, but in Europe performance is still measured relative to the broader market

67

Deviation From a Style a Reality Case

We have used a statistical criteria to define a style, but just because a style does well/badly statistically, does not mean that a real manager will perform well/badly

The stocks within a particular style often have diversity of performance, so a manager can perform different than the style if picking stocks that perform differently. Example: Low P/E ratio stock will be classified by our models as cheap and in the model it WILL be a part of value portfolio. In reality a value manager may note that this stock has been receiving earnings downgrades, meaning that the future earnings forecast of that stock will go down, meaning that this stock has a higher prospective P/E ratio. A good value manager will most likely avoid that stock while a poor one might buy it.
68

Deviation From a Style a Reality Case

A low P/E criterion for buying stocks will probably produce a smallcap bias, which manager may feel (or be obliged) to avoid. Avoiding small cap stocks will compromise dedication of investing in lowest P/E stocks Also, low P/E stocks tend to be concentrated in a few sectors (those sectors change over time), so to get representation in some other sectors, manager may be forced to buy some high P/E stocks. Clearly, this is modified value approach and the returns may be quite different from those found in academic studies that measure value as simply bottom P/E stocks.
69

Style Rotation

70

Equity style timing

There are times when an investor is better off holding growth stocks and times when values turn to lead
the same can be applied for small and large capitalization stocks

Historically, small stocks have been outperforming larger ones and value indices were outperforming growth indices It is important to know when each style is outperforming to be able to take advantage of positive alphas of all styles: Style rotation Tactical asset allocation with styles
create a portfolio with fixed style allocations implemented by use of passive style indices or by active stock selection within each style
71

Style Rotation: Introduction

In the US and UK, over the long time period, value stocks have outperformed the growth stocks
However, styles are cyclical in performance In the second half of 1990s - technology boom - growth outperforms value After recessions small cap stocks underperform large cap stocks There is profit potential in switching between styles Therefore, style rotation is used by a number of managed funds, including hedge funds

72

Style Rotation: Introduction

Style rotation strategy

Invest 100% of funds in value (small) when it is expected to do better and switch all your funds to growth (large) when growth (large) is expected to perform better Possibility of long/short investing with hedge funds Based on forecasts and successful market timing Bare in mind the transaction costs (this can be a very expensive strategy)

73

Style Rotation: The Existing Evidence

Value and/or Small Cap style outperforms their counterparts in the long run should we ignore the short run? US success style rotation stories
Kao and Schumaker (1999), value/growth and small/large rotation using macroeconomic factors Asness, Friedman and Liew (2000), value/growth rotation using earnings spreads Levis and Liodakis (1999), value/growth and small/large rotation using macroeconomic, fundamental and market factors Levis and Tessaromatis (2004), value/growth and small/large rotation under different implementation rules
74

UK success style rotation stories

Style Rotation: The Data

Constructing style portfolios from individual stocks (the whole universe of stocks within a market) Based on P/E (or Price-to-Book) ratio to create value and growth portfolios and Based on Market Values to create small cap and large cap portfolios Buying individual stocks can increase transaction costs Size indices: e.g. FTSE 100 (large) and FTSE Small-Cap Style indices: e.g. FTSE 350 Value and FTSE 350 Growth Why indices? To reduce transaction costs related to portfolio construction and rebalancing Easy application through Exchange Traded Funds (ETFs) and Stock Index Futures
75

Hypotheses for selecting variables which can forecast style performance

There are several ways to construct style-timing models, which are based on one of the following three hypothesis: economic cycle hypothesis assumption that a style trend reflects economic cycle strong economy implies investment in value stocks the stock valuation hypothesis style trend reflects the fundamental value of individual stock in each style pool mean reversion hypothesis assumption that the style trend reflects the mean reversion of the overvalued and the undervalued stocks Based on these hypotheses, we can develop different equity style-timing models

76

Which variables give signals for switching?

Forecasting variables: macroeconomic, fundamental and market factors
Macroeconomic: e.g. interest rates, term structure, exchange rates, inflation Fundamental: e.g. P/E ratio spread between value and growth, market dividend yield Market factors: e.g. volatility of the equity market, risk premium Number of variables that one can use is very large

Eliminating less relevant variables by using: e.g. OLS model, stepwise regression, Principal Component Analysis method, Granger causality test Signals can take the form of just a direction or direction and magnitude
77

Example 1: The real GDP forecast model

Based on the economic cycle hypothesis Style portfolios have sector bias Forecast economic indicators signal style trend Relationship between consensus real GDP growth forecast and the relative cumulative return on of S&P 500 Value index relative to the S&P 500 Growth index is showing that the value style index did well when the economy was expected to do well and vice versa

78

Example 2: Forecast P/E Spread model

Growth index has higher P/E ratio than the value index
reflects the higher growth potential of stocks in the growth index

The model assumes that the P/E ratio spread between the growth index and the value index stays at the equilibrium level in the long run

The signal for style switching is driven as follows:

when forecast P/E spread narrows the value index should do well relationship between the forecast P/E spread and relative cumulative return of S&P 500 Value index relative to the S&P 500 Growth index is showing that the value style index did well when the forecast P/E spread was low (i.e. when it has smaller negative value) and vice versa 79

Example 3: Earnings-revision model

Successful model for ranking individual stocks Using earnings forecasts changes Spread between those changes is found for value and growth stocks Using the 5 month earnings forecast changes spread and comparing it to the relative cumulative return of the S&P 500 value index relative to the S&P 500 growth index, one can see that they follow the same pattern over time

80

Example 4: Residual risk spread

When there is an increase in the residual risk of a particular stock it means that it is either falling behind the general market trend or it has been neglected by investors Model is based on the mean reversion hypothesis One would expect that the specific-risk value-growth spread can indicate which style should one switch to There is a very close relationship between the spread of the residual risk of value-growth index and the relative cumulative return of the S&P 500 value index relative to the S&P 500 growth index
81

Other useful signals for style switching

Lagged Value-Growth or Small-Large spread Past trend used as an indicator of a future trend Seasonal indicators January effect: Value, small cap stocks tend to outperform the rest of the market during the first five days in January sometimes generating returns of 40% Technical analysis indicators Charts and patterns in share prices as well as quantitatively based indicators such as moving averages Fundamental and economic indicators interest rates rising rates affect growth stocks in negative way harder that value stocks Upward sloping yield curve environment: higher rates for long term investors (growth) will reduce value of growth stocks more
82

Other useful signals for style switching

Other business cycle indicators profit expectations default premium on bonds relationship between prices of bonds and stocks business expansion large stocks pick up expansion earlier than small ones

rising risk premium for small stocks warns investors to shift to larger ones depreciation of the domestic currency enables large companies to benefit Do not consider one indicator in isolation combination of indicators is best to be used!
83

Example of the forecasting model for style rotation

Logit model: dependant variable (y*) is binary taking value of 1 if value/growth (small/large) spread is positive and zero otherwise: y*t = + ' Xt-1 + ut is a constant term, ' is transposed vector of kx1 parameters, Xt-1 are lagged explanatory variables and ut is the error term

The style spread is a function of the lagged values of variables selected to give forecasting signal

84

Example of the forecasting model

Probability that the next month will be value (small cap) is given by: exp( t ) Pt 1 P( y t 1 1) 1 exp( t )

x x

The forecasted probability value above 0.5 indicates a month that favours an investment in the small-cap (value) style; a probability value below 0.5 indicates a preference for an investment in the large-cap (growth) style This procedure now has to be repeated throughout the sample

85

Recursive logit estimation

For example: 120 months estimation window generating probability through recursive logit 1 month investment window : invest in the style model indicated by P value

Extending this forward by the investment window

e.g. Jan 1988

e.g. Dec 2010

86

Style Rotation: Investment Considerations

Long short strategy and creation of zero-investment portfolio is limited to hedge funds only due to restriction on short-selling Long only style managers with a certain philosophy (value, growth etc) are limited in their switching as the philosophy of manager and client requirements impose constraints to the degree of deviation from the main style Style rotation has large implications on the risk of the portfolio, while institutional investors have to follow predetermined risk boundaries, usually expressed in terms of tracking error to a benchmark therefore the flexibility and scope of style rotation is constrained by the target risk set Transaction costs

Through portfolio construction and rebalancing (index trading is cheaper) Rebalancing according to the prediction of the forecast model
87

Style Rotation: UK Case Study

Source: Levis and Liodakis (1999) Data: UK, customised style indexes using 3868 firms
To construct size and style portfolios companies are ranked based on their Market values and book-to-market ratio

Period: 1968-1997 Frequency: Monthly data Model : recursive Logit regressions suggesting that the sign of the style spread is related to a number of economic and market characteristics i.e. model is forecasting the sign of the spread
In particular two logit models are specified one for value/growth and one for small/large spread 72 months initial estimation period 276 months for out-of-sample evaluation
88

Style Rotation: UK Case Study

Variables used for forecasting small/large spread

Univariate OLS Constant Inflation Term Structure Annual Change in Coincident Indicator Change in 3-Month T-Bill Yiled Small/Large Dividend Yield Ratio Equity Risk Premium -1.1769 0.0021 0.0548 0.0294 0.0283 0.1996 ** *

* **

OLS -0.014 -1.4503 0.0008 0.0461 0.0411 0.0238 0.0411

Logit 0.5839 ** -51.4201 ** 0.129 ** 2.2591 ** 2.3729 * 0.09051 ** 11.9202**

89

Style Rotation: UK Case Study

Variables used for forecasting value/growth spread
Univariate OLS Constant (Value-Growth)(-1) Annual Change in Coincident Indicator Inflation Change in 3-Month T-Bill Yiled Term Structure Monthly Change in /$ Exchange Rate Equity Risk Premium Value/Growth Dividend Yield Ratio 0.214 0.0404 -0.5777 -0.0131 0.0004 -0.085 0.0298 -0.0001 ** * ** * ** OLS 0.0111 ** 0.2059 ** 0.0218 -0.5355 ** -0.0071 0.0926 ** Logit 0.8363 ** 18.002 ** 1.733 -42.6208 ** -0.7569 -4.8142 **

90

Style Rotation: UK Case Study

Small/large rotation results
Perfect Strategy 1 Strategy 2 Strategy 3 Foresight Average Annual Returns (%) net of transaction costs (100bps) net of transaction costs (150bps) net of transaction costs (200bps) End of Period Wealth () net of transaction costs (100bps) net of transaction costs (150bps) net of transaction costs (200bps) Break-Even Transaction Costs (Benchmark: Small-cap Index) Standard Deviation Sharpe Ratio Recommended Switches Total predictions correct Small-cap predictions correct Large-cap predictions correct Neutral Positions 25.20 23.24 22.26 21.28 21 405 13 479 10 677 8 448 217bp 18.18 1.39 47 60.14% 63.41% 36.59% 25.02 23.93 23.39 22.85 20 724 16 068 14 135 12 426 379bp 17.95 1.39 26 60.87% 62.68% 37.32% 24.63 23.40 22.79 22.18 18 698 13 998 12 105 10 465 301bp 17.93 1.37 59 54.71% 27.90% 17.39% 37.46 32.11 29.44 26.76 310 429 93 311 50 932 27 716 Small Cap Large Cap FTALL 20.58 20.21 20.07

7 795

5 864

5 848

20.59 1.82 123 51.09% 48.91%

17.18 1.20

22.13 0.91

21.86 0.92

91

Style Rotation: UK Case Study

Value/growth rotation results
Perfect Strategy 1 Strategy 2 Strategy 3 Foresight Average Annual Returns (%) net of transaction costs (100bps) net of transaction costs (150bps) net of transaction costs (200bps) End of Period Wealth () net of transaction costs (100bps) net of transaction costs (150bps) net of transaction costs (200bps) Break-Even Transaction Costs (Benchmark:Value Index) Standard Deviation Sharpe Ratio Recommended Switches Total predictions correct Value predictions correct Growth predictions correct Neutral Positions 27.47 26.18 25.53 24.89 33 128 24 411 20 931 17 933 61bp 20.15 1.36 31 68.84% 82.61% 17.39% 27.12 26.29 25.87 25.45 30 651 25 985 22 676 20 487 54bp 20.13 1.35 20 67.39% 85.28% 14.72% 26.84 25.47 24.84 24.18 28 859 24 494 22 750 21 007 29bp 20.07 1.34 33 83.33% 5.43% 11.23% 32.28 27.84 25.63 23.41 98 271 36 330 22 008 13 299 Value 26.67 Growth 15.27 FTALL 20.07

27 506

2 122

5 848

20.04 1.61 102

20.32 1.31

19.66 0.78

21.86 0.92

92

Style Rotation: UK Case Study

Limitations of the study: Individual stocks uses rather than ready available indices
More expensive trading, transaction costs on rebalancing are higher Restrictions in reality on holding small cap stocks due to liquidity issues

No control for risk and no risk constraints used For improvement of these Tessaromatis (2004) limitations see Levis and

93

Problems with quantitative style rotation

Reliability of the forecasting signals:
Large cap/small cap cycles are very long and volatile Hard to distinguish if the strategy isnt working or its just an interim volatility Macroeconomic indicators showing greater reliability than some others (e.g. fundamental indicators)

Changing the forecasting variables (inputs) in quantitative models can alter the signals and results of the strategy models are sensitive to the inputs Models often showing lesser number of switches than a manager would make in reality Could the same variables be used for the entire period under analysis?
In reality managers would change input variables over time
94

Tactical Asset Allocation (TAA) with Styles

95

Definition of TAA with styles

In the same manner as the optimal asset allocation should be achieved between stocks and bonds, one should consider that style oriented portfolio should not have all the investment placed in one style only
Solution would be an active style management tilting the equity portfolio with either growth stocks or value stocks in order to capture more superior return generated by in-favor style Modest bid: 55% - 45% Aggressive bid: 75% - 25% How aggressive it is going to be depends on the risk tolerance of the client (plan sponsor) and the confidence level of the investment manager 96

Advantages of TAA with Styles

Locks in excess return
if allocation to winning style (e.g. value) is not reduced from the SAA proportion, say 70% value / 30% growth, that style will eventually underperform and returns of the portfolio would revert to average can be implemented using judgmental rules, regression models or automatic rebalancing : when either style reaches 55% in the portfolio, it would be reduced back to meet 50/50 criteria (assuming 50/50 is split between styles in SAA)

Provides diversification
portfolio with similar proportion of value and growth stocks is automatically diversified by sector active stock-picker can concentrate his bets within each style and gain advantage example of the high-tech stocks in 1990s
97

Advantages of TAA with Styles

Complements other portfolio management techniques
its function is as in tactical asset allocation it can be a separate style or it can give flexibility to existing growth and value managers

Saves time and fees

there is one manager instead of two price discounts can be offered as portfolio size increases fewer managers to correspond to saves time

98

Disadvantages of TAA with Styles

If there are so many advantages, why isnt active style management more widely used? Very difficult to market
investors used to be misinformed and not educated about it this picture is changing nowadays

Complicates the task of research and portfolio management especially when combined with active stock selection
growth are risk takers and value are more risk averse

And finally..

99

...when is the style rotation and TAA with styles pointless?

Return

FTSE All Share Index

Value Growth

Standard deviation

There can be periods when both value stocks and growth stocks underperform the market - style rotation and TAA with styles is pointless then!
100

Sector Rotation

101

Introduction to sector rotation

Sector Rotation Models exist primarily to help investors identify and participate in new trending sectors of the stock market Fluctuation in interest rates, inflation, exchange rates and changes in general market condition cause sectors to go in and out of favour for investors Investors following sector rotation are in fact engaged in style rotation as sectors can be classified as value/growth/small/large: if the leading style in the market is large cap, it is simply because it is time when sectors concentrated in that style are leading the way style management heavily tilted toward certain industries - be aware! industries are not constant through time on their style grid: as industries are in favour they move up and to the right as they become larger and higher in price to book ratio Callan Associates case study: analyzed 115 industries 1991-1998 S&P 1500 Composite Index Ranking size: 1-38, small sector, 39-76 medium sector, 77-115 large sector Ranking P/B ratio: 1-57 value sectors, 58-115 growth sectors
102

Example of sector rotation

Examples of findings of the Callan Associates study: basic materials industries have moved down and to the left in the grid managers in the midcap value and growth and small-cap style boxes are dealing with different industries in 1998 than they were seven years before that Financial services moved up and to the right
P/B
growth large & expensive

value

small

& cheap

small

medium

large

size

103

More on sector rotation

Sectors do not remain in the same style box through time Hence, a value manager buying may in effect be engaged in sector rotation unknowingly Not all managers have analytical skills to analyse all sectors sector rotation is difficult to apply Sector rotation can provide excess returns - capturing shifts in industries seems more important than style diversification Core manager with a sector rotation abilities would provide a valuable foundation for a successful strategy

104

Reading
Chapter 6 in Readings in Investment management by Fabozzi Chapter 1 in The Handbook of Equity Style Management, Coggin, Fabozzi, Arnott, Frank J. Fabozzi Associates

Chapter 12 &13 in Investment Management by S. Lofthouse, Wiley Equity Style Management: Evaluating and Selecting Investment Styles, Klein and Lederman

105