Table of Contents
├── (1) Cover (Pages: 1-4)
├── (2) Title Page (Pages: 5-5)
├── (3) Copyright Page (Pages: 6-8)
├── (4) Contents (Pages: 9-12)
├── (5) Chapter 1 For Whom? Why? And How? (Pages: 13-16)
│   ├── (5.1) 1.1 What You Will Find Here (Pages: 14-14)
│   ├── (5.2) 1.2 Asterisks; Or, How to Read This Book (Pages: 15-14)
│   └── (5.3) 1.3 Acknowledgments (Pages: 15-16)
├── (6) Chapter 2 The Problem: From Ideas to Profit (Pages: 17-22)
│   ├── (6.1) 2.1 How to Invest in Your Edge, and Hedge the Rest (Pages: 19-19)
│   ├── (6.2) 2.2 How to Size Your Positions (Pages: 20-19)
│   ├── (6.3) 2.3 How to Learn from Your History (Pages: 20-20)
│   ├── (6.4) 2.4 How to Trade Efficiently (Pages: 21-20)
│   ├── (6.5) 2.5 How to Limit Factor Risk (Pages: 21-21)
│   ├── (6.6) 2.6 How to Control Maximum Losses (Pages: 22-21)
│   ├── (6.7) 2.7 How to Determine Your Leverage (Pages: 22-21)
│   └── (6.8) 2.8 How to Analyze New Sources of Data (Pages: 22-22)
├── (7) Chapter 3 A Tour of Risk and Performance (Pages: 23-41)
│   ├── (7.1) 3.1 Introduction (Pages: 24-25)
│   ├── (7.2) 3.2 Alpha and Beta (Pages: 26-26)
│   ├── (7.3) 3.3 Where Does Alpha Come From? (Pages: 27-29)
│   ├── (7.4) 3.4 Estimate Risk in Advance (Pages: 30-36)
│   │   ├── (7.4.1) 3.4.1 What Is Risk? (Pages: 30-31)
│   │   └── (7.4.2) 3.4.2 Measuring Risk and Performance (Pages: 32-36)
│   ├── (7.5) 3.5 First Steps in Risk Decomposition (Pages: 37-37)
│   ├── (7.6) 3.6 Simple Hedging (Pages: 38-39)
│   ├── (7.7) 3.7 Separation of Concerns (Pages: 40-40)
│   └── (7.8) 3.8 Takeaway Messages (Pages: 41-41)
├── (8) Chapter 4 An Introduction to Multi‐Factor Models (Pages: 42-55)
│   ├── (8.1) 4.1 From One Factor to Many (Pages: 43-46)
│   ├── (8.2) 4.2 ★Frequently Asked Questions About Risk (Pages: 47-51)
│   ├── (8.3) 4.3 ★The Machinery of Risk Models (Pages: 52-54)
│   └── (8.4) 4.4 Takeaway Messages (Pages: 55-55)
├── (9) Chapter 5 Understand Factors (Pages: 56-83)
│   ├── (9.1) 5.1 The Economic Environment (Pages: 59-67)
│   │   ├── (9.1.1) 5.1.1 Country (Pages: 59-59)
│   │   ├── (9.1.2) 5.1.2 Industries (Pages: 60-61)
│   │   ├── (9.1.3) 5.1.3 Beta (Pages: 62-65)
│   │   └── (9.1.4) 5.1.4 Volatility (Pages: 66-67)
│   ├── (9.2) 5.2 The Trading Environment (Pages: 68-77)
│   │   ├── (9.2.1) 5.2.1 Short Interest (Pages: 68-69)
│   │   ├── (9.2.2) 5.2.2 Active Manager Holdings (AMH) (Pages: 70-71)
│   │   └── (9.2.3) 5.2.3 Momentum (Pages: 72-77)
│   ├── (9.3) 5.3 The Company: Valuation Factors (Pages: 78-82)
│   │   └── (9.3.1) 5.3.1 Value (Pages: 78-82)
│   └── (9.4) 5.4 Takeaway Messages (Pages: 83-83)
├── (10) Chapter 6 Use Effective Heuristics for Alpha Sizing (Pages: 84-109)
│   ├── (10.1) 6.1 Sharpe Ratio (Pages: 86-87)
│   ├── (10.2) 6.2 Estimating Expected Returns (Pages: 88-90)
│   ├── (10.3) 6.3 Risk‐Based Sizing (Pages: 91-92)
│   ├── (10.4) 6.4 ★Empirical Analysis of the Sizing Rules (Pages: 93-99)
│   ├── (10.5) 6.5 From Ideas to Positions (Pages: 100-100)
│   ├── (10.6) 6.6 Time‐Series Risk‐Based Portfolio Targeting (Pages: 101-106)
│   ├── (10.7) 6.7 ★Frequently Asked Questions About Performance (Pages: 107-107)
│   └── (10.8) 6.8 Takeaway Messages (Pages: 108-109)
├── (11) Chapter 7 Manage Factor Risk (Pages: 110-134)
│   ├── (11.1) 7.1 Tactical Factor Risk Management (Pages: 111-118)
│   │   └── (11.1.1) 7.1.1 Optimize If You Must (Pages: 116-118)
│   ├── (11.2) 7.2 Strategic Factor Risk Management (Pages: 119-129)
│   │   ├── (11.2.1) 7.2.1 Setting an Upper Limit on Factor Risk (Pages: 119-122)
│   │   ├── (11.2.2) 7.2.2 Setting a Limit on Market Exposure (Pages: 123-124)
│   │   ├── (11.2.3) 7.2.3 Setting an Upper Limit on Single-Stock Holdings (Pages: 125-127)
│   │   └── (11.2.4) 7.2.4 Setting an Upper Limit on Single-Factor Exposures (Pages: 128-129)
│   ├── (11.3) 7.3 Systematic Hedging and Portfolio Management (Pages: 130-132)
│   └── (11.4) 7.4 Takeaway Messages (Pages: 133-134)
├── (12) Chapter 8 Understand Your Performance (Pages: 135-160)
│   ├── (12.1) 8.1 Factor (Pages: 136-138)
│   │   └── (12.1.1) 8.1.1 Performance Attribution (Pages: 136-138)
│   ├── (12.2) 8.2 Idiosyncratic (Pages: 139-150)
│   │   ├── (12.2.1) 8.2.1 Selection, Sizing, Timing (Pages: 140-147)
│   │   └── (12.2.2) 8.2.2 The Relationship Between Performance and Diversification (Pages: 148-150)
│   ├── (12.3) 8.3 Trade Events Efficiently (Pages: 151-153)
│   ├── (12.4) 8.4 ★Use Alternative Data! (Pages: 154-157)
│   ├── (12.5) 8.5 ★Frequently Asked Questions About Performance (Pages: 158-159)
│   └── (12.6) 8.6 Takeaway Messages (Pages: 160-160)
├── (13) Chapter 9 Manage Your Losses (Pages: 161-171)
│   ├── (13.1) 9.1 How Stop‐Loss Works (Pages: 162-162)
│   ├── (13.2) 9.2 Why a Stop‐Loss Policy? (Pages: 163-165)
│   ├── (13.3) 9.3 The Costs and Benefits of Stop‐Loss (Pages: 166-169)
│   └── (13.4) 9.4 Takeaway Messages (Pages: 170-171)
├── (14) Chapter 10 ★Set Your Leverage Ratio for a Sustainable Business (Pages: 172-179)
│   ├── (14.1) 10.1 A Framework for Leverage Decisions (Pages: 174-177)
│   └── (14.2) 10.2 Takeaway Messages (Pages: 178-179)
├── (15) Chapter 11 ★★Appendix (Pages: 180-202)
│   ├── (15.1) 11.1 Essential Risk Model Formulas (Pages: 180-182)
│   │   ├── (15.1.1) 11.1.1 Factor Model (Pages: 180-180)
│   │   ├── (15.1.2) 11.1.2 Factor-Mimicking Portfolios (Pages: 181-181)
│   │   ├── (15.1.3) 11.1.3 Percentage Idio Variance (Pages: 182-181)
│   │   ├── (15.1.4) 11.1.4 Betas (Pages: 182-181)
│   │   └── (15.1.5) 11.1.5 Marginal Contribution to Factor Risk (Pages: 182-182)
│   ├── (15.2) 11.2 Diversification (Pages: 183-183)
│   ├── (15.3) 11.3 Mean‐Variance Formulations (Pages: 184-185)
│   │   ├── (15.3.1) 11.3.1 Mean-Variance Portfolios (Pages: 184-184)
│   │   └── (15.3.2) 11.3.2 A Robust Mean-Variance Formulation (Pages: 185-185)
│   ├── (15.4) 11.4 Proportional‐Rule Formulations (Pages: 186-186)
│   ├── (15.5) 11.5 Generating Custom Factors (Pages: 187-190)
│   │   └── (15.5.1) 11.5.1 Interpretation and Use (Pages: 191-190)
│   ├── (15.6) 11.6 Optimization Formulations (Pages: 191-191)
│   │   └── (15.6.1) 11.6.1 Equal-Sized Portfolio with Constraints on Participation Rate (Pages: 191-191)
│   ├── (15.7) 11.7 Tactical Portfolio Optimization (Pages: 192-193)
│   │   └── (15.7.1) 11.7.1 Variants (Pages: 194-193)
│   ├── (15.8) 11.8 Hedging Formulations (Pages: 194-197)
│   └── (15.9) 11.9 Optimal Event Trading (Pages: 198-202)
├── (16) References (Pages: 203-208)
├── (17) Index (Pages: 209-210)
└── (18) EULA (Pages: 211-211)
