Portfolio Construction and Risk Budgeting

Building on the solid foundation of the first two bestselling editions, this significantly extended third edition updates previous content and incorporates three new chapters. Expanding on the comprehensive treatment of alternative portfolio construction techniques and discussing the area of risk budgeting from an asset management perspective, you are given a critical review of a range of portfolio techniques.

This revised third edition provides you with:

• key concepts and methods to implement quantitatively-driven portfolio construction;
• knowledge of satellite investing, estimation error heuristics, scenario optimisation, mean variance investing, Bayesian methods, budgeting active risk, non-normality and multiple manager allocation;
• practical applications and accessible problem-solving skills;
• quantitative analysis that is supported by extensive examples, tables and charts to help practitioners adopt the subject matter in their day-to-day work.

  The new chapters bring you up-to-date information on portfolio optimisation, with differentiation of alpha and beta testing, covariance estimation, showing estimation error vs. model error and fundamental vs. statistical models.

  This book is highly recommended for practitioners including portfolio managers, consultants, strategists, marketers and quantitative analysts. It would also give an edge to final year undergraduates and MBAs looking to expand their knowledge beyond the mean-variance based solutions commonly taught in business schools.

Dr Bernd Scherer heads the Advanced Applications Group in Europe and the Middle East at Deutsche Bank's Asset Management division, offering cutting edge investment solutions to a sophisticated institutional client base.

Before joining Deutsche Bank, Dr Scherer globally headed fixed-income portfolio research at Schroder Investment Management in London. During his 10-year career in asset management he has held various positions at Morgan Stanley, Oppenheim Investment Management and JP Morgan Investment Management.

He publishes widely in relevant asset management industry journals and investment handbooks and is a regular speaker at investment conferences. Dr Scherer's current research interests focus on asset valuation, portfolio construction, strategic asset allocation and asset liability modelling. Dr Scherer holds MBA and MSc degrees from the University of Augsburg and the University of London, as well as a PhD in finance from the University of Giessen.