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Praise for Finding Alpha
"Eric Falkenstein is more than one of the smartest and funniestpeople in finance. He's been a banker, a key model builder at amajor rating agency, and a hedge fund trader. In this tour deforce, he outlines the successes and failures of financial theoryapplications in the real world from the perspective of anaggressive early adopter of the best ideas in finance. To this day, I think Eric's private firm default model is one of the best papersever published in applied finance, and this wonderful book fallsinto the same category.„
--Donald R. van Deventer, PhD, founder and ChiefExecutive Officer, Kamakura Corporation
“People dismissed Columbus when he said the world was round. Thank goodness he persisted. Like Columbus, Falkenstein challengesstandard thinking, only this time about risk and reward. As themeltdown of the capital markets has shown, the financial industryclearly missed something with regard to risk management. As anindustry, we need to consider alternative theories on risk, andclearly Falkenstein is on to something here. Agree with him or not, Finding Alpha is worth a read.„
--Kevin M. Blakely, President and CEO, The RiskManagement Association
“Writing through the lens of an experienced practitioner, Falkenstein digests decades of research in capital markets, financial economics, and investment psychology that have shapedmodern investment theory. This text is an excellent companion forportfolio managers, investment students, or anyone seeking tobetter understand the relationship between risk, returns, andfinancial reward."
--Todd Houge, PhD, CFA, The University of Iowa
How do we find alpha whenrisk does not correlate withreturn?
Finding Alpha is a practical guide to achieving alphawhen conventional measures of risk rarely correlate with higherreturns. Author Eric Falkenstein-a PhD who has also been a riskmanager and portfolio manager--tells the story of alpha fromits beginnings to its current reversal, where risk is now evidencedby return as opposed to vice versa.
Falkenstein begins by walking readers through the Capital AssetPricing Model (CAPM), as well as other well-documented theoriesabout risk and return, and explores how these theories measure upto current empirical evidence being documented by researchers andacademics. He also outlines a novel approach to the issues of howbenchmark risk and investor overconfidence affects expected assetreturns, how to understand the nature of alpha and risk, and how touse practical applications of alpha-seeking strategies that hedeveloped as a successful hedge fund manager.
Finding Alpha concludes by outlining some real-lifeapplications of alpha in finance and explains how the search foralpha affects the day-to-day life of all financialprofessionals.
"Eric Falkenstein is more than one of the smartest and funniestpeople in finance. He's been a banker, a key model builder at amajor rating agency, and a hedge fund trader. In this tour deforce, he outlines the successes and failures of financial theoryapplications in the real world from the perspective of anaggressive early adopter of the best ideas in finance. To this day, I think Eric's private firm default model is one of the best papersever published in applied finance, and this wonderful book fallsinto the same category.„
--Donald R. van Deventer, PhD, founder and ChiefExecutive Officer, Kamakura Corporation
“People dismissed Columbus when he said the world was round. Thank goodness he persisted. Like Columbus, Falkenstein challengesstandard thinking, only this time about risk and reward. As themeltdown of the capital markets has shown, the financial industryclearly missed something with regard to risk management. As anindustry, we need to consider alternative theories on risk, andclearly Falkenstein is on to something here. Agree with him or not, Finding Alpha is worth a read.„
--Kevin M. Blakely, President and CEO, The RiskManagement Association
“Writing through the lens of an experienced practitioner, Falkenstein digests decades of research in capital markets, financial economics, and investment psychology that have shapedmodern investment theory. This text is an excellent companion forportfolio managers, investment students, or anyone seeking tobetter understand the relationship between risk, returns, andfinancial reward."
--Todd Houge, PhD, CFA, The University of Iowa
How do we find alpha whenrisk does not correlate withreturn?
Finding Alpha is a practical guide to achieving alphawhen conventional measures of risk rarely correlate with higherreturns. Author Eric Falkenstein-a PhD who has also been a riskmanager and portfolio manager--tells the story of alpha fromits beginnings to its current reversal, where risk is now evidencedby return as opposed to vice versa.
Falkenstein begins by walking readers through the Capital AssetPricing Model (CAPM), as well as other well-documented theoriesabout risk and return, and explores how these theories measure upto current empirical evidence being documented by researchers andacademics. He also outlines a novel approach to the issues of howbenchmark risk and investor overconfidence affects expected assetreturns, how to understand the nature of alpha and risk, and how touse practical applications of alpha-seeking strategies that hedeveloped as a successful hedge fund manager.
Finding Alpha concludes by outlining some real-lifeapplications of alpha in finance and explains how the search foralpha affects the day-to-day life of all financialprofessionals.
