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Search - Foundations for Scientific Investing

Foundations for Scientific Investing
Author: Timothy Falcon Crack

This revised fourth edition lays a firm foundation for thinking about and conducting investment. It does this by helping to build capital markets intuition and critical thinking skills. The material in this book is the product of 25 years of investment experience and 20 painstaking years of destructive testing in university classrooms. Although ... more »the topic is applied investments, the integration of finance, economics, accounting, pure mathematics, statistics, numerical techniques, and spreadsheets (or programming) make this an ideal capstone course at the advanced undergraduate or masters/MBA level.

The book has a heavily scientific/quantitative focus, but the material should be accessible to a motivated practitioner or talented individual investor with (for the most part) only high school level mathematics. Although aimed at the advanced undergraduate or masters/MBA level, the careful explanations of a wide range of advanced capital markets topics makes this an excellent book for a U.S. PhD student in need of an easily accessible foundation course in capital markets theory and practice. There are literature reviews of multiple advanced areas, and many research questions are identified that need to be answered to fill gaps in the literature; these research questions would be ideal for a master's thesis or a chapter of a PhD.

The applied nature of the book also makes it ideal for capital markets practitioners. For example, in one exercise, the reader is taken by the hand and walked through construction of a worked spreadsheet example of an active alpha optimization using actual stock market data. The reader gets to build ex-ante alphas, and feed them into an optimization that weighs returns, risk, and transaction costs. A portfolio is rebalanced based on the optimization, and ultimately a backtest is conducted to measure ex post alpha.

Other practitioner material includes advanced time value of money exercises, a review of retirement topics, an extensive discussion of dividends, P/E ratios, transaction costs, the CAPM, and value versus growth versus glamour, and a review of more than 100 years of stock market performance, and more than 200 years of interest rates. Special attention is paid to difficult topics like the Roll critique, smart beta, factor-based investing, and Grinold-Kahn versus Black-Litterman models.

Every investor needs capital markets intuition and critical thinking skills to conduct confident, deliberate, and skeptical investment. The overarching goal of this book is to help investors build these skills.

ISBN-13: 9780994118226
ISBN-10: 0994118228
Publication Date: 8/24/2015
Pages: 572
Edition: Revised Fourth
Rating:

0 stars, based on 0 rating

Publisher: Timothy Crack
Book Type: Paperback
Members Wishing: 0
Reviews: Amazon | Write a Review

Genres:

Business & Money >> Finance
Business & Money >> Investing >> Introduction

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