Active Portfolio Management

Why a second edition? Why take time from busy lives? Why devote the energy to improving an

existing text rather than writing an entirely new one? Why toy with success?

The short answer is: our readers. We have been extremely gratified by Active Portfolio

Management's reception in the investment community. The book seems to be on the shelf of every

practicing or aspiring quantitatively oriented investment manager, and the shelves of many

fundamental portfolio managers as well.

But while our readers have clearly valued the book, they have also challenged us to improve it.

Cover more topics of relevance to today. Add empirical evidence where appropriate. Clarify some

discussions.

The long answer is that we have tried to improve Active Portfolio Management along exactly these

dimensions.

First, we have added significant amounts of new material in the second edition. New chapters cover

Advanced Forecasting (Chap. 11), The Information Horizon (Chap. 13), Long/Short Investing

(Chap. 15), Asset Allocation (Chap. 18), The Historical Record for Active Management (Chap. 20),

and Open Questions (Chap. 21).

Some previously existing chapters also cover new material. This includes a more detailed discussion

of risk (Chap. 3), dispersion (Chap. 14), market impact (Chap. 16), and academic proposals for

performance analysis (Chap. 17).

Second, we receive exhortations to add more empirical evidence, where appropriate. At the most

general level: how do we know this entire methodology works? Chapter 20, on The Historical

Record for Active Management, provides some answers. We have also added empirical evidence

about the accuracy of risk models, in Chap. 3.

At the more detailed level, readers have wanted more information on typical numbers for

information ratios and active risk. Chapter 5 now includes empirical distributions of these statistics.

Chapter 15 provides similar empirical results for long/short portfolios. Chapter 3 includes empirical

distributions of...