Customer Reviews

Active Portfolio Management: A Quantitative Approach for Producing Superior Returns and Controlling Risk

5 star:		(7)
4 star:		(0)
3 star:		(0)
2 star:		(4)
1 star:		(1)

 

 

The book carefully develops the concepts of Portfolio Theory. Topics include: risk aversion, the Capital Market Line, the Markowitz Portfolio Selection Model, the Capital Asset Pricing Model, beta, market equilibrium, etc. Subsequent chapters cover fixed income securities, security analysis, derivatives and active portfolio management.

The book is extremely detailed and very well written. It covers more than the basics. It includes a variety of advanced theories and describes recent academic research.

A excellent choice !

If you work for one of the top alpha quant shops (Barclays, Goldman, etc.), this text is a the proverbial must read. These are the guys that essentially invented quantitative finance in its modern form, building upon the [only somewhat applicable] concepts of Sharpe and Rosenberg and demonstrating how they can be harnassed to drive alpha. Anybody who has given this text a poor review obviously doesn't work in quantitative finance (chances are they're merely stock-pickers). If you want to understand how to drive alpha and beat the market, this text goes a lot further than explaining the simple concepts of information ratio and tracking error; instead, this book touches on the beauty of multi-factor models and covariance risk management.

I know many have this book and have never read it. Others read this book but never really understand it. However, if you can read it and understand it, it can offer a powerful tool for how to allocate capital. It actually is the basis for most indexing and quantitative methodologies. When applied to fundemental approaches to investment it can be quite powerful.

Sadly, though not enough money managers embrace what this book is trying to say with regards to risk and return.

This book was recommended to me as the bible of active management. I attempted reading it several times, but gave up everytime. Coming from a science and engineering background, I find the exposition very verbose, yet lacking a ground-up derive-from-fundamentals approach. Even in the description of CAPM, I cannot tell the assumptions from the conclusions of the theory. The book is not an easy read, but I don't think that's because the subject is inherently hard.

There's three basic categories of quants. Structurers, risk managers and traders. Structurers don't need this book. They should go buy Hull and be happy. Every risk manager and trader in the business needs this book. When I was first introduced to this book, I figured it was more or less only for their money management businessa manual for building Barclays Index Plus funds. That is what Grinold and Kahn do for a living, and they probably wrote the book to have something to give to dumb pupils who don't know anything. The book certainly covers some of the details and models used in money management tasks. However, this book is a lot more than that. They didn't write a book about specific investment instances that come up. They write a book which generalizes well to all fields involving information under uncertainty. They don't talk much about futures or options; this really is about equities, but if you're trading in those other markets, you still need this book.

Yes, you actually do need some calculus and linear algebra to read the book. It's written for people who understand math; it's a book on *quantitative* finance -not "seat of pants" trading. Even if you skip the mathematics (and most of the heavy stuff is kept neatly tucked away in appendices, so as not to frighten the MBAs and small children), you're likely to get something out of it: at least you'll have a vague idea of what the propeller heads in the white laboratory jackets are up to. What I find most remarkable about the book is how it rewards upon rereadings. Got a trading problem? There is probably a section in this book which relates to it. When I'm banging my head on a problem, and getting no joy from the google machine, Grinold and Kahn's book often has something which at least points me to the answer. This is a remarkable quality, as the book really was, as far as I can tell, written to help out with the kinds of tasks they face at BGI.

If you're a former physics nerd, the classic physics book it most resembles for me is the Landau & L. (amazon won't let me say the other guy's name) book on classical mechanics. The clarity and density of G&K's book very much resemble L&L. Like L&L, it can be used as a first text on this sort of thing. You may prefer to get your basics elsewhere; I liked learning mechanics from Goldstein for example, but once I knew my p's and q's, I tossed Goldstein and just read L&L when I needed professional insight. G&K is like this; theirs is the book that you'll keep around as a reference once you have a handle on the basics whether you learn the basics from them or not.

Personally, I would have liked a little more meat on non-parametric statistics, maybe some overarching Bayesian framework and some ideas on backtesting, a la bootstrap resampling, but it would probably change the tenor of the book and reduce its utility for what they do at work. Still, they'll probably read this review, and if they take requests, that's mine.

This book is a funny phenomenon in itself: it seems that every portfolio manager keeps a copy on her desk, but nobody I've talked to likes the book, or has even really read it. I read it and had to struggle hard to go from one page to the next. It's one of the WORST books I've ever read in any field. The book attempts to give the reader a comprehensive overview of the portfolio management discipline. Unfortunately, it's extremely dry, to the point of boring the reader to death. A lot of pages are also wasted on topics of dubious value, while important subjects like global management is treated lightly. I highly recommend against this book. It's a waste of money.

Grinhold and Kahn's concept of the Information Ratio being dependant on skill (i.e. the correlation between expected outperformance and real outperformance) and sqrt. breath (i.e. the number of securities a manager follows and the number of times he rebalances his portfolio) is theoretically excellent. However, in the real world these correlations and even breath are hard to measure and mostly propriatary to the manager. Yet G&K go on for 500 pages on quantitive techniques that might be interesting for those with a PhD in Risk Management.

For the average (practical) person interested in portfolio management this book is way too academic, using some 10 Greek letters and Cov, Std per page (and I'm not even talking about the technical appendices), making it very hard to read and comprehend.

This is truly the bible of active quantitative portfolio management. Its only true weakness is its lengthyness and the rather naive analysis of the CAPM.

Excellent book for whom is looking for a practical approach that at the same time is presented through a rigorous mathematical methodology. The book is absolutely superior over the academic textbooks that usually limit themselves to CAPM and efficient market theory. Grinold and Kahn go much forward and at the same time had managed to clearly and meticulously show the CAPM model, its limitations and the more sophisticated tools developed from it. Beside of showing the active way of managing a portfolio, the serious mathematical presentations through which the different theories such as CAPM are described are very convincing of how difficult it could be to beat the market.

I read this books about a year aand a half go, and thought at the time it introduced some really good techniques for manaaging a portfolio. One would need a linear algebra and statictical background to fully unserstand it, and access to some expensive software and data bases to implement it.

However, I now think the techniques depend on reasonably stable fincial markets, and after the emerginging crises starting in the summer of 2007, I have decided not to prusue this farther.