Rational Investing

Rational Investing: The Subtleties of Asset Management is a short nontechnical book that gives an overview of the world of asset management.small-jacket

The objective was to write a concise book (we managed to keep it around 200 pages) and with no equations (ok … with just a few equations) that summarizes key issues in asset management from both an academic and a practitioner perspective. We cover the structure of financial markets, active versus passive management, what we can and cannot forecast, the sources of investment performance, some stylized examples of portfolio building, and cognitive biases in investment management.

Who should read this book? Reading the book requires a basic knowledge of statistics and financial markets, and hence the book is not for anyone. Neither is it meant to be a textbook. It is aimed at

  • professionals (e.g., lawyers, accountants, etc.) who may have to make investment decisions in their professional or personal life, but do not have a formal education in investment management,
  • undergraduate and graduate students who want to consolidate their learning in investment management,
  • finance professionals who wish to challenge their knowledge.

The book can be bought on Amazon or from Columbia University Press.

See also our discussion here.

From the back cover

“This book takes a refreshing perspective: To excel at investment management, it is essential to identify the structural components of performance as well as the challenges of successfully executing on each component. This book should be required reading for any investor―whether institutional or individual.” Campbell Harvey, Fuqua School of Business, Duke University

“This wonderful book packs into two hundred pages the central elements you need for successful investing. Essentials include identifying long-run return sources you understand and can believe in, cost-effectively constructing well-diversified portfolios across them while respecting your constraints, and avoiding common behavioral pitfalls. You learn to appreciate the role of luck in realized returns and to look beyond luck by better understanding the systematic factors driving your portfolio―or any asset manager’s portfolio. Read it!” 
Antti Ilmanen, author of Expected Returns: An Investor’s Guide to Harvesting Market Rewards

“Strongly based on solid research and clearly written, this important book is a great way to invest a day in increasing your investment success.” 
Charles D. Ellis, author of The Index Revolution and Winning the Loser’s Game

“Well-researched and grounded in academic literature, Rational Investing asks the important question: What drives long-term investment performance? Professionals and portfolio managers will find many gems in this book.” Anurag Sharma, University of Massachussetts–Amherst