Financial Modeling of the Equity Market

An inside look at modern approaches to modeling equityportfolios Financial Modeling of the Equity Market is themost comprehensive, up-to-date guide to modeling equity portfolios.The book is intended for a wide range of quantitative analysts,practitioners, and students of finance. Without sacrificingmathematical rigor, it presents arguments in a concise and clearstyle with a wealth of real-world examples and practicalsimulations. This book presents all the major approaches tosingle-period return analysis, including modeling, estimation, andoptimization issues. It covers both static and dynamic factoranalysis, regime shifts, long-run modeling, and cointegration.Estimation issues, including dimensionality reduction, Bayesianestimates, the Black-Litterman model, and random coefficientmodels, are also covered in depth. Important advances intransaction cost measurement and modeling, robust optimization, andrecent developments in optimization with higher moments are alsodiscussed. Sergio M. Focardi (Paris, France) is a founding partnerof the Paris-based consulting firm, The Intertek Group. He is amember of the editorial board of the Journal of PortfolioManagement. He is also the author of numerous articles and books onfinancial modeling. Petter N. Kolm, PhD (New Haven, CT and NewYork, NY), is a graduate student in finance at the Yale School ofManagement and a financial consultant in New York City. Previously,he worked in the Quantitative Strategies Group of Goldman SachsAsset Management, where he developed quantitative investment modelsand strategies.