Title: Principles for drafting an investment policy with illustrations

Authors: Robert Gyorgy; Anastasios G. Malliaris

Addresses: Northern Trust Global Investments, 50 South LaSalle Street, Chicago, Illinois 60604, USA. ' Department of Economics and Finance, Quinlan School of Business, Loyola University Chicago, 1 East Pearson Street, Chicago, Illinois 60611, USA

Abstract: During the past few decades, significant theoretical advances in portfolio theory and asset pricing have substantially increased our understanding of how to construct optimal portfolios. These theoretical developments have challenged professional portfolio management to develop appropriate tools to incorporate these novel ideas. In this paper, we contribute by focusing on the critical role of the investment policy as a tool that connects portfolio theory to portfolio management. We select, list, discuss and illustrate with examples several principles that are essential items of an investment policy.

Keywords: portfolio selection; strategic allocation; active portfolio management; passive portfolio management; investment policy; asset pricing; portfolio theory.

DOI: 10.1504/IJPAM.2012.049202

International Journal of Portfolio Analysis and Management, 2012 Vol.1 No.2, pp.144 - 160

Received: 03 May 2012
Accepted: 01 Jun 2012

Published online: 23 Aug 2014 *

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