Financial Analysis, Asset Allocation, and Portfolio Construction: Theory & Practice Hany Fahmy1, Ph.D. October 2014 1
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[email protected] Printed in Canada ISBN: 978-0-9917975-6-1 ii Acknowledgment The …nancial support of the Math Endowment Fund at University of Waterloo is gratefully acknowledged. I am indebted to Denis Chichkine1 for all his e¤orts in producing this study. In particular, his signi…cant contribution to the practical parts of Chapters 4 and 5 is highly appreciated. 1 Denis has many years of experience in the …nancial services industry. He graduated from the mathematics and business double degree program at University of Waterloo in 2009. He worked as a cross-asset fund structurer at Barclays Capital in Tokyo, Japan. Contents 1 Preface 2 2 Introduction to Investment Management 4 2.1 The Economics of Investment Management . 4 2.1.1 The Meaning of Investing . 4 2.1.2 Proprietary Investing . 6 2.1.3 Investment Managers . 6 2.2 The Portfolio Management Process . 7 3 Portfolio Planning 8 3.1 Understanding the Investor .