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Equity Research
As principals of Jacobs Levy Equity Management, Bruce Jacobs and Ken Levy have devoted 20 years to state-of-the-art research into security pricing, portfolio construction, and sophisticated trading techniques. Their groundbreaking work on disentangling return regularities, engineering portfolios to performance benchmarks, and long-short investing and integrated optimization has been featured at professional forums such as the Institute of Chartered Financial Analysts' Continuing Education Seminars and in the pages of Institutional Investor and the Wall Street Journal. In the 1980s, Jacobs and Levy began to publish a series of articles articulating the investment philosophy that had emerged from their research. These articles appeared in the peer-reviewed Financial Analysts Journal, Journal of Portfolio Management, and Journal of Investing, as well as in practitioner-oriented publications such as Pensions & Investments. They helped to change the course of modern money management by demonstrating that the supposedly efficient equity market offered recurring profit opportunities that could be identified and exploited to provide consistent outperformance. Jacobs and Levy's seminal insight is that U.S. equity market returns are driven by complex combinations of company fundamentals, macroeconomic conditions, and behavioral factors, and that these effects can be detected with the use of extensive computer modeling grounded in intuitive and theoretically plausible relationships. Exploiting these relationships requires simultaneous analysis of numerous variables across a broad and diverse range of stocks; portfolio optimization and performance attribution systems that are customized to the security selection process; sophisticated trading techniques; and creative research. The articles abstracted
here are grouped into five sections that cover the range of research at Jacobs Levy Equity Management. The articles abstracted under
“Security Selection” focus on the U.S. equity market as a complex system and some of the methods that can best be used to “disentangle” that complexity. Those listed under “Plan Architecture and Portfolio
Engineering” touch on the scope of the security selection/portfolio construction problem, the goal of portfolio management, and the place of an individual portfolio within the investor's overall investment scheme.
The articles abstracted under “Long-Short Investing” discuss the construction of
portfolios, including market neutral long-short and enhanced active 120-20
portfolios, that take advantage of short selling to expand investment
opportunities and enhance performance. “Portfolio Optimization Including Short Positions” contains articles that
examine some of the general and specific issues that arise when constructing
portfolios that have both long and short positions. “Market Simulation” delves into a new area of
research—the modeling of financial markets using the asynchronous-time JLM Market Simulator. |
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