Management Chapter 15 Index Portfolio Strategy Construction Techniques

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CHAPTER 15

EQUITY PORTFOLIO MANAGEMENT STRATEGIES

I. An Overview

 Passive versus Active Management

Passive Equity Portfolio Management is a long-term buy-and-hold strategy

II. Passive Equity Portfolio Management Strategies

 Passive equity portfolio management attempts to design a portfolio to replicate the

performance of a specific index

A. Index Portfolio Strategy Construction Techniques

1. Full replication

B. Tracking Error and Index Portfolio Construction

C. Methods of Index Portfolio Investing

1. Index Funds

2. Exchange-Traded Funds

III. Active Equity Portfolio Management Strategies (Exhibit 15.4)

 The goal of active equity management is to earn a portfolio return that exceeds the

return of a passive benchmark portfolio, net of transaction costs, on a risk-adjusted

basis

A. Fundamental Strategies (Exhibits 15.5 and 15.6)

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 Earnings momentum strategy

C. Anomalies and Attributes (Exhibit 15.8 and 15.9)

V. Asset Allocation Strategies

A. Integrated Asset Allocation (Exhibits 15.18 and 15.19)