Contents

The Main Themes in Three Simple Tables	vii
Preface	xi
Who Should Read the Book?	xiv
Acknowledgments	xv
About the Author	xvii
Introduction	1
i.     Efficiently Inefficient Markets	3
ii.    Global Trading Strategies: Overview of the Book	7
iii.   Investment Styles and Factor Investing	14
Part I   Active Investment	17
Chapter 1    Understanding Hedge Funds and Other Smart Money	19
Chapter 2    Evaluating Trading Strategies: Performance Measures	27
Chapter 3    Finding and Backtesting Strategies: Profiting in Efficiently Inefficient Markets	39
Chapter 4    Portfolio Construction and Risk Management	54
Chapter 5    Trading and Financing a Strategy: Market and Funding Liquidity	63
Part II   Equity Strategies	85
Chapter 6    Introduction to Equity Valuation and Investing	87
Chapter 7    Discretionary Equity Investing	95
Interview with Lee S. Ainslie III of Maverick Capital	108
Chapter 8    Dedicated Short Bias	115
Interview with James Chanos of Kynikos Associates	127
Chapter 9    Quantitative Equity Investing	133
Interview with Cliff Asness of AQR Capital Management	158
Part III   Asset Allocation and Macro Strategies	165
Chapter 10  Introduction to Asset Allocation: The Returns to the Major Asset Classes	167
Chapter 11  Global Macro Investing	184
Interview with George Soros of Soros Fund Management	204
Chapter 12  Managed Futures: Trend-Following Investing	208
Interview with David Harding of Winton Capital Management	225
Part IV   Arbitrage Strategies	231
Chapter 13  Introduction to Arbitrage Pricing and Trading	233
Chapter 14  Fixed-Income Arbitrage	241
Interview with Nobel Laureate Myron Scholes	262
Chapter 15  Convertible Bond Arbitrage	269
Interview with Ken Griffin of Citadel	286
Chapter 16  Event-Driven Investments	291
Interview with John A. Paulson of Paulson & Co.	313
References	323
Index	331