An exciting new model for
improved asset allocation accuracy in every market environment
Modern Portfolio Theory
(MPT) and asset allocation are the foundations on which most institutional investors base
their decisions.
But many aspects of MPT
werent designed for todays fast-changing markets.
Dynamic Portfolio Theory and
Management introduces a time-adaptive procedure that addresses this issue and simplifies
the decision-making process.
While asset allocation
programs must adapt themselves to changing market conditions to succeed, how to accomplish
that has been another matter. This book reveals a new model that:
- Helps investors change
allocations based on economic factors
- Optimizes multi-time periods
into a single future time period
- Assists forecasting of stock
prices, bond prices, and interest rates
The First Asset Allocation
Model to Accurately Take Into Account--and Adapt to--Changing Market Conditions
Modern Portfolio Theory
(MPT) and asset allocation are the foundations upon which institutional investors account
for the impact of changes in risk on changes in expected return. But legitimate questions
remain over methods currently used to determine the inputs required to drive the model.
How can professional investors trust the results obtained when they are often uncertain
over the input numbers used to arrive at those results?
Until now, they could not.
Dynamic Portfolio Theory & Management introduces an all-new model that, unlike the
static nature of MPT, adapts to changing market conditions as they occur. This
breakthrough approach:
- Provides a procedure to
evaluate which factors truly influence the performance of most major asset classes
- Allows investors to modify
allocations based on changing economic conditions and factors
- Dramatically increases
accuracy by optimizing multiple past time periods into a single future time period
In todays complex investing
arena, investors must account for multiple time periods when periodically reallocating
their portfolios. Dynamic Portfolio Theory and Management provides a time-adaptive asset
allocation model that, for the first time, provides that flexibility. It explains in
straightforward and practical language how investors can implement and apply a dynamic
asset allocation procedure--in an increasingly uncertain marketplace.
Either you believe that
markets move because certain causative factors make them move or you dont. If you do not
believe this, you will suffer whatever performance your buy-and-hold portfolio metes out.
If you do believe in such dynamic causes, then you have a chance of reacting to changes in
these underlying factors or not reacting.
The basic benefit from
patient application of the principles and procedures detailed in this book is to shift the
investment odds in your favor.
From the Prefac
When he first introduced
Modern Portfolio Theory a half century ago, Nobel Prize Laureate Harry Markowitz helped to
quantify and provide formal structure to investment planning and projection And while a
number of techniques have been introduced over the years to complement MPT and aid
investors in creating rational portfolios of multiple investments, none has solved the
fundamental question of how an investor or portfolio manager can accurately determine
expected returns, standard deviations, correlation matrices, and other required inputs.
Dynamic Portfolio Theory and
Management takes a dramatic step forward in resolving these issues by introducing
DynaPorte, a fundamental and dynamic framework that uses macroeconomic and market-related
factors to revise and update asset allocations. This framework allows the use of an
indefinite number of discreet historical time periods to optimize the model fit.
Representing a true quantum leap in portfolio theory to confidently control the future
performance of a diversified portfolio, the books methodology:
- Links asset allocations
directly to the value of macroeconomic factors without the need to calculate the expected
performance of the investments
- Focuses on the size and
frequency of losing months, as opposed to the volatility of all return months
- Improves upon standard
deviation by addressing the effect of skewness in investment performance return
While MPT eliminates one
seemingly complex problem, it in many ways introduces a less difficult yet just as
maddening problem: How can investors accurately determine the inputs necessary to gauge
the tradeoff of changes in risk with changes in expected return? Dynamic Portfolio Theory
and Management introduces a revolutionary model and framework designed to instantly
increase both your accuracy and versatility in controlling portfolios of investments from
stocks, bonds, and interest rates to real estate and even hedge funds--by linking asset
allocation directly to the values of macroeconomic factors instead of inexact and
error-prone calculations of expected performance.
Richard Oberuc is founder
and owner of Burlington Hall Asset Management and chair of the Foundation for Managed
Derivatives Research, whose sponsors include Morgan Stanley, Goldman Sachs, John W. Henry
& Company, Merrill Lynch, and other leading Wall Street firms. A veteran of more than
25 years in the financial industry, Oberuc has devoted considerable time and attention to
developing innovative supply/demand models and hedging methodologies.
Author Biography
Richard Oberuc is chairman
of the Foundation for Managed Derivatives Research, whose sponsors include Morgan Stanley,
Goldman Sachs, and other firms. A veteran of more than 25 years in the financial industry,
he is also the founder and owner of Burlington Hall Asset Management
320 pages