Stocks and bonds? Real estate? Hedge funds? Private equity? The conventional way of allocating across asset classes fails to account for the overlapping risks they represent. Investors must consider the underlying factor risks behind asset class labels, just as eating a healthy diet requires looking through foods to the nutrients they contain. Factor risks are the hard times that affect all assets, and investors are rewarded for weathering losses during bad times with long-run risk premiums. Optimally harvesting factor risk premiumson our own or by hiring othersrequires identifying our particular set of bad times, and exploiting the difference between them and those of the average investor.
Click through the chapter summaries to learn more about Asset Management by Andrew Ang, or check out “Instructor Resources” to find case studies and lecture notes for use in instruction. If you are an instructor and would like to access this section, please email Custserv.email@example.com with your course information to receive a password.