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Quantitative Equity Portfolio Management by Daehwan Kim, Ludwig B Chincarini

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APPENDIX 15BMeasures of Opportunity

At a monthly investment meeting, portfolio manager’s typically may look at the performance of their portfolios over the month or the quarter. They usually look at classic attribution or risk-model attribution. They may look at which stocks did well and which stocks did not do so well. One question that might be asked in such a meeting is what was the opportunity in the investment universe. By opportunity, we mean the possibility to create excess returns through quantitative management. There are many measures of opportunity. For example, the cross-sectional standard deviation of the returns of the stocks in the universe for the given performance period is a measure of opportunity. A larger standard deviation ...

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