Global Asset Allocation
New Methods and Applications

This is a sophisticated book about international investing. Focusing on recent theoretical and empirical research, it walks readers through a variety of topics.

 

There are excellent discussions of various extensions of the capital asset pricing model (CAPM) to the international arena. The central role that purchasing power parity—or its failure—plays in these models is detailed. Correlations between international markets have been increasing. They are stochastic and have a noticeable tendency to increase in market downturns. Various models—including EGARCH—are used to assess this dynamic.

Other topics include emerging markets, value vs. growth investing in the international arena, and the ongoing convergence of risk premiums across countries.

Contents

1. The Global Economy and Investment Management

2. International Asset Pricing, Portfolio Selection, and Currency Hedging: An Overview

3. The Anatomy of Volatility and Stock Market Correlations

4. The Correlation Breakdown in International Stock Markets

5. Global Economic Risk Profiles: Analyzing Value and Volatility Drivers in Global Markets

6. Testing Market Integration: The Case of Switzerland and Germany

7. Emerging Market Investments: Myth or Reality?

8. The Structure of Sector and Market Returns: Implications for International Diversification

9. The Value-Growth Enigma: Time-Varying Risk Premiums and Active Portfolio Strategies

10. Integrating Tactical and Equilibrium Portfolio Management: Putting the Black-Litterman Model to Work

Formulas are used sparingly, but the authors delve into technicalities as the discussion requires. I really like the way the authors cite recent literature. For theoretically inclined practitioners, this book is a goldmine. Academics who are new to international investments will also find this an excellent vehicle for orienting themselves to the literature and current topics of interest.
 

 

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