Creating portfolio risk and return models [42]

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Bullet points include: Active management, see e.g. 5.2.3 of Kemp (2010) Active management is about working out which assets will outperform and by how much; The best outcomes involve an effective trade-off between return and risk; The better the underlying investment ideas and the wider their range the better is likely to be the overall outcome; Assessing investment performance should take into account the possibility that outcomes arose by luck rather than by skill; There are lots of pieces of information ‘out there’ waiting to be discovered, the trick is to find the pieces that will actually prove useful going forwards; Transaction and other costs typically reduce overall investor return; and There are fewer managers who actually are skilled than the number claiming to be skilled. Portfolio construction not necessarily quant focused

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