The Sortino Framework for Constructing Portfolios

, by Sortino; Surz; Hand; van der Meer; Riddles; Pupillo; Plantinga

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ISBN: 9780123749925 | 0123749921
Cover: Hardcover
Copyright: 10/26/2009

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The Sortino Portfolio Construction Methodology distinguishes between risk, which can be managed; danger, which can be avoided but not managed; and chaos, which is neither manageable nor avoidable.

Contributors	p. ix
Prologue	p. xv
Building the Framework
The Big Picture	p. 3
Turning Points	p. 3
MPT Criticism	p. 5
Innovations to MPT	p. 6
Hands-on Experience	p. 8
The Risk of Investing	p. 9
Implementation Frustration	p. 10
Yes, But Does It Work?	p. 11
Getting All The Pieces of the Puzzle	p. 13
Equity Market Composition	p. 14
Evaluating Investment Managers: The Search for, and Use of, Skill	p. 17
Conclusion	p. 21
Beyond the Sortino Ratio	p. 23
The Sortino Ratio	p. 23
Improvements	p. 24
The Bernardo Kuan Study	p. 30
Conclusion	p. 49
Optimization and Portfolio Selection	p. 53
Introduction	p. 53
The Forsey-Sortino Optimizer	p. 54
The DTR Optimizer	p. 58
Applications
Birth of the DTR 401(k) Plan	p. 67
Background	p. 67
QDIA Options	p. 69
Goals and Objectives	p. 70
Potential Conflicts	p. 72
QDIA Evaluation	p. 72
Constructing a Participant-Driven Benefit Plan	p. 73
Recommendations for Regulators	p. 79
Recommendations for Plan Sponsors	p. 80
Recommendations for Consultants	p. 81
Performance Measurement	p. 81
Summary and Conclusions	p. 81
A Reality Check from an Institutional Investor	p. 83
Institutional Portfolio Manger's Role is Limited	p. 84
Multiple Benchmarks	p. 84
Misfit Risk	p. 85
Risk Statistics	p. 86
Downside Risk	p. 87
Identifying Bad Events is the First Step	p. 88
A Picture is Worth a Thousand Words (or Statistics)	p. 90
How to Adjust for the Time Frame	p. 91
How Do Institutional Investors View Downside Risk?	p. 91
Why Stop There?	p. 92
In Summary	p. 92
Integrating the DTRÖ Framework into a Complex Corporate Structure	p. 93
Introduction	p. 94
The Integration Process	p. 94
The Benefits	p. 100
The Proper Role of Regulation in Financial Markets	p. 103
Role of Regulation	p. 104
Role of the Regulator	p. 104
Accidents Happen	p. 107
Criteria for New Rules	p. 108
One Person's Risk is Another Person's Danger	p. 109
Summary and Conclusions	p. 112
Sharing Downside Risk in Defined Benefit Pension Funds	p. 115
Introduction	p. 116
Downside Risk and the Impact on Pension Fund Participants	p. 117
A Simplified Model of a Pension Fund	p. 120
A Simulation Experiment	p. 123
Conclusion	p. 127
On the Foundation of Performance Measures Under Asymmetric Returns	p. 129
Introduction	p. 130
The Maximum Principle and the Modified Sortino Ratio	p. 132
Conclusions	p. 140
Appendix Formal Definitions and Procedures	p. 145
Overview	p. 145
The Desired Target ReturnÖ	p. 145
Style Analysis: Determining the Style Blend of a Fund	p. 150
Index	p. 153
Table of Contents provided by Ingram. All Rights Reserved.

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The Sortino Framework for Constructing Portfolios

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Table of Contents

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The Sortino Framework for Constructing Portfolios

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Table of Contents

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