ANDREW S. CLARKE, CFA, is an investment researcher and writer. He has worked at Morningstar and Vanguard, where he served as an assistant to Vanguard founder and indexing pioneer John C. Bogle. He worked with Mr. Bogle on his bestselling Common Sense on Mutual Funds. He has published research in The Journal of Index Investing and is the author of Wealth of Experience.

NELSON W. WICAS, PHD, has over 30 years of experience in quantitative equity strategies, including 16 years at The Vanguard Group and 12 years at Redpoint Investment Management. He earned his PhD in economics at the University of Pennsylvania and has been a visiting professor of economics at Haverford College.

GANESH A. SUNTHARAM, CFA, is the lead portfolio manager for global equity strategies at Aware Super, a retirement fund in Australia with over 1 million members. With more than 25 years of investment experience, he has served as the Chief Investment Officer of Redpoint Investment Management, as a hedge fund manager at Perpetual Limited and as a risk consultant at Barra. He has been the president of the Sydney CFA Society.

PREFACE XIII

PART I FROM HEURISTICS TO STATISTICS 1
CHAPTER ONE RISK, RETURN, EUREKA! 3
CHAPTER TWO WHAT IS A SECURITY WORTH? 15
CHAPTER THREE THE BIRTH OF MODERN PORTFOLIO THEORY 33
CHAPTER FOUR INDEXES: TAKING THE MARKET'S MEASURE 55

PART II FROM THEORY TO PRACTICE 71
CHAPTER FIVE A DAGGER OF ARISTOTELIAN LOGIC 73
CHAPTER SIX ASSET ALLOCATION: THE GREAT DEBATE 95
CHAPTER SEVEN MARKOWITZ MEETS MAIN STREET 111
CHAPTER EIGHT HOW INDEXING CHANGED ACTIVE 129
CHAPTER NINE MANAGING MANAGERS IN MODERN PORTFOLIOS 141

PART III FROM REVOLUTION TO COUNTER REVOLUTION 161
CHAPTER TEN THE RISE OF BEHAVIORAL FINANCE 163
CHAPTER ELEVEN RISK-AWARE ACTIVE: THINKING IN BETS 185

PART IV FROM PUBLIC TO PRIVATE 209
CHAPTER TWELVE ALTERNATIVES AND THE NORTHWEST FRONTIER 211
CHAPTER THIRTEEN REAL ESTATE: PROFITS IN PROPERTY 225
CHAPTER FOURTEEN INFRASTRUCTURE: TWO BUILDING BLOCKS 237
CHAPTER FIFTEEN HEDGE FUNDS: PLAYING BOTH SIDES 251
CHAPTER SIXTEEN PRIVATE EQUITY: KNOWN UNKNOWNS 271
CHAPTER SEVENTEEN THE PORTFOLIO BLUEPRINT 285

ACKNOWLEDGMENTS 297
ABOUT THE AUTHORS 299