Managing Equity Portfolios: A Behavioral Approach to Improving Skills and Investment Processes - Hardcover

Ervolini, Michael A.

Hardcover

ISBN 10: 0262028344 ISBN 13: 9780262028349

Publisher: The MIT Press, 2014

Synopsis

A groundbreaking framework for improving portfolio performance that goes beyond traditional analytics, offering new ways to understand investment skills, process, and behaviors.

Portfolio management is a tough business. Each day, managers face the challenges of an ever-changing and unforgiving market, where strategies and processes that worked yesterday may not work today, or tomorrow. The usual advice for improving portfolio performance―refining your strategy, staying within your style, doing better research, trading more efficiently―is important, but doesn't seem to affect outcomes sufficiently. This book, by an experienced advisor to institutional money managers, goes beyond conventional thinking to offer a new analytic framework that enables investors to improve their performance confidently, deliberately, and simply, by applying the principles of behavioral finance.

W. Edwards Deming observed that you can't improve what you don't measure. Active portfolio management lacks methods for measuring key inputs to management success like skills, process, and behavioral tendencies. Michael Ervolini offers a conceptually straightforward and well-tested framework that does just that, with evidence of how it helps managers enhance self-awareness and become better investors. In a series of short, accessible chapters, Ervolini investigates a range of topics from psychology and neuroscience, describing their relevance to the challenges of portfolio management. Finally, Ervolini offers seven ideas for improving. These range from maintaining an investment diary to performing rudimentary calculations that quantify basic skills; each idea, or “project,” helps managers gain a deeper understanding of their strengths and shortcomings and how to use this knowledge to improve investment performance.

About this title

About the Author:

Michael A. Ervolini is CEO of Cabot Research, a global software company that provides innovative analytics to money managers to help them improve portfolio performance.

Review:

The Disciplined Trader meets Moneyball. This book is a worthwhile read for any portfolio manager, analyst, or trader focused on continual improvement and even greater success.

―Warren Touwen, Core Product, Bloomberg

For fund managers seeking to improve their investing skills there are many publications offering tantalizing but fragmented paths for progress. In this book Michael Ervolini brings together topics such as fast and slow thinking, checklists, and self-awareness to construct coherent and pragmatic solutions. Using the principles of the scientific method he shows how a successful investment process can evolve through time, improving the consistency of decision making and keeping investing skills relevant in an ever-changing world.

―Simon Savage, Asset Manager, GLG Partners

Michael Ervolini is a clever man in touch with reality. Recognizing that portfolio management is a tough, challenging business full of conflicts, he gets it that rationality is easy to talk about but difficult to implement. It requires recognition of deep uncertainty and the human resource that is emotion. Since passive investing puts you at the mercy of the market, active portfolio management has to be made to work. It can be, Ervolini says, if there is proper feedback. It requires a willingness to be curious about what we do and to create ways to learn from experience. This is what he does in this book. Read it!

―David Tuckett, Director, Centre for the Study of Decision-Making Uncertainty, University College, London

After years of deep, questioning research into the biases and beliefs that can undermine the 'normal' behavior of equity portfolio managers, Michael Ervolini skillfully tells us how to improve our choices. He does this by providing practical ideas for learning how to do more of what we already do well and how to identify and fix what is not working. No asset class and no asset manager are immune from human fallibility when it comes to portfolio decisions, and with the help of this book you can learn how to showcase your skills while modifying behavioral tendencies.

―Arnold S. Wood, President and Chief Executive Officer, Martingale Asset Management

About this edition

• Publisher: The MIT Press
• Publication date: 2014
• ISBN 10: 0262028344
• ISBN 13: 9780262028349
• Binding: Hardcover
• Edition number: 1
• Number of pages: 304