Financial market behavior and key trading strategies-illuminated by interviews with top hedge fund experts

Efficiently Inefficient describes the key trading strategies used by hedge funds and demystifies the secret world of active investing. Leading financial economist Lasse Heje Pedersen combines the latest research with real-world examples and interviews with top hedge fund managers to show how certain trading strategies make money-and why they sometimes don't.

Pedersen views markets as neither perfectly efficient nor completely inefficient. Rather, they are inefficient enough that money managers can be compensated for their costs through the profits of their trading strategies and efficient enough that the profits after costs do not encourage additional active investing. Understanding how to trade in this efficiently inefficient market provides a new, engaging way to learn finance. Pedersen analyzes how the market price of stocks and bonds can differ from the model price, leading to new perspectives on the relationship between trading results and finance theory. He explores several different areas in depth-fundamental tools for investment management, equity strategies, macro strategies, and arbitrage strategies-and he looks at such diverse topics as portfolio choice, risk management, equity valuation, and yield curve logic. The book's strategies are illuminated further by interviews with leading hedge fund managers: Lee Ainslie, Cliff Asness, Jim Chanos, Ken Griffin, David Harding, John Paulson, Myron Scholes, and George Soros.

Efficiently Inefficient effectively demonstrates how financial markets really work.

Free problem sets are available online at http://www.lhpedersen.com

Autorentext

Lasse Heje Pedersen is a finance professor at Copenhagen Business School and New York University's Stern School of Business, and a principal at AQR Capital Management. A distinguished financial economist, he has won a number of awards, notably the Bernácer Prize, awarded to European economists under forty who have made outstanding contributions in macroeconomics and finance.

Inhalt

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