AbstractThe essence of investing is to generate return and manage risk. In the absence of arbitrage opportunities, return generation is about gaining exposure to risks that are well rewarded. To manage this exposure, we can diversify rewarded risks and hedge risks that are not rewarded. However, our ability to efficiently manage exposure is compromised by how we perceive the investment problem. This paper highlights four pitfalls in how we build portfolios and discusses how they can be remedied.
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Bibliographic InfoArticle provided by Capco Institute in its journal Journal of Financial Transformation.
Volume (Year): 26 (2009)
Issue (Month): ()
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Investment management; risk management;
Find related papers by JEL classification:
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
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- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
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