Two pioneers and innovators in the money management field present their choice of groundbreaking, peer-reviewed articles on subjects including portfolio engineering and long-short investment strategy. More than just a collection of classic review pieces, however, Equity Management provides new material to introduce, interpret, and integrate the pieces, with an introduction that provides an authoritative overview of the chapters. Important and innovative, it is destined to become the "Graham and Dodd" of quantitative equity investing.

Equity Management: Quantitative Analysis for Stock Selection

Business & Money

Bruce I. Jacobs

Kenneth N. Levy

Economics

McGraw=Hill

Capital Ideas and Market Realities: Option Replication, Investor Behavior, and Stock Market Crashes

In Capital Ideas and Market Realities, Bruce Jacobs sifts through the history of modern finance, from the efficient market hypothesis to behavioral psychology and chaos theory, to determine the cause of recent market crashes. He finds that some investment strategies, especially those based on theories that ignore the human element, tend to self-destruct, and can take markets down with them. Ironically, it is often those strategies that purport to reduce the risk of investing that can pose the greatest danger. Of particular concern are trading strategies based on the Nobel Prize-winning option pricing model. This model gave rise to option replication, a technique for synthesizing the payoffs to an option by trading between the underlying asset and cash. Replication requires selling as stock prices decline and buying as stock prices rise. When enough money follows this type of trend-following "dynamic hedging," bubbles and crashes can result. In 1987, trading related to an option replication strategy known as "portfolio insurance" led to the largest crash in U.S. market history. Today, similarly mechanistic trading underlies trillions of dollars in exchange-traded and over-the-counter options and swaps, as well as myriad institutional and retail products designed to provide investors with excess returns at low or no risk. Capital Ideas and Market Realities uncovers the risks these strategies pose for market stability and investor wealth. The book has also become a lightning rod in the debate over the need for better investment product risk disclosure.

Wiley/Blackwell

How investment strategies designed to reduce risk can increase risk for everyone&#8213;and can crash markets and economies Financial crises are often blamed on unforeseeable events, the unforgiving nature of capital markets, or just plain bad luck. Too Smart for Our Own Good argues that these crises are caused by certain alluring investment strategies that promise both high returns and safety of capital. In other words, the severe and widespread crises we have suffered in recent decades were not perfect storms. Instead, they were made by us. By understanding how and why this is so, we may be able to avoid or ameliorate future crises&#8213;and maybe even anticipate them.One of today's leading financial thinkers, Bruce I. Jacobs, examines recent financial crises&#8213;including the 1987 stock market crash, the 1998 collapse of the hedge fund Long-Term Capital Management, the 2007-2008 credit crisis, and the European debt crisis&#8213;and reveals the common threads that explain these market disruptions. In each case, investors in search of safety were drawn to novel strategies that were intended to reduce risk but actually magnified it&#8213;and blew up markets. Too Smart for Our Own Good takes a behind-the-curtain look at: <ul><li>The inseparable nature of investment risk and reward and the often counterproductive effects of some popular approaches for reducing risk</li><li>A trading strategy known as portfolio insurance and the key role it played in the 1987 stock market crash</li><li>How option-related trading disrupted markets in the decade following the 1987 crash</li><li>Why the demise of Long-Term Capital Management in 1998 wreaked havoc on US stock and bond markets </li><li>How mortgage-backed financial products, by shifting risk from one party to another, created the credit crisis of 2007-2008 and contributed to the subsequent European debt crisis</li></ul>This broad, detailed investigation of financial crises is the most penetrating and objective look at the subject to date. In addition, Jacobs, an industry insider, offers invaluable insights into the nature of investment risk and reward, and how to manage risk.Risk is unavoidable&#8213;especially in investing&#8213;and financial markets connect us all. Until we accept these facts and manage risk in responsible ways, major crises will always be just around the bend. Too Smart for Our Own Good is a big step toward smarter investing&#8213;and a better financial future for everyone.

Too Smart for Our Own Good

McGraw-Hill Education on Brilliance Audio

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Books by Bruce I. Jacobs