Contents

AL
RI
About the CMT Association ix

TE
What Is the CMT® Program? xi
How This Book Was Created xiii

MA
Prefacexv

SECTION I Risk Management 1

v
D
Chapter 1 System Design and Testing 3
TE

Charles D. Kirkpatrick II and Julie R. Dahlquist

Chapter 2 Money and Portfolio Risk Management 31

GH

Charles D. Kirkpatrick II and Julie R. Dahlquist

Chapter 3 System Evaluation and Testing 53

RI

Perry J. Kaufman

Chapter 4 Practical Considerations 126

PY

Perry J. Kaufman
CO

Chapter 5 Risk Control 169

Perry J. Kaufman

Chapter 6 Statistical Analysis 238

David Aronson

Chapter 7 Hypothesis Tests and Confidence Intervals 283

David Aronson

SECTION II Asset Relationships 315

Chapter 8 Regression317
Markos Katsanos
 Chapter 9 International Indices and Commodities 325
Markos Katsanos

Chapter 10 The S&P 500 351

Markos Katsanos

Chapter 11 European Indices 366

Markos Katsanos

Chapter 12 Gold374
Markos Katsanos

Chapter 13 Intraday Correlations 390

Markos Katsanos

Chapter 14 Intermarket Indicators 399

Markos Katsanos

Chapter 15 A Unique Way to Visualize Relative Strength 421

Julius de Kempenaer and Mathew Verdouw, CMT, CFTe

SECTION III Portfolio Management 457

vi Chapter 16 Fact, Fiction, and Momentum Investing 459
Clifford S. Asness, Andrea Frazzini, Ronen Israel,
Contents

and Tobias J. Moskowitz

Chapter 17 Analyzing the Macro-Finance Environment 484

Robert A. Weigand

Chapter 18 Portfolio Risk and Performance Attribution 518

Robert A. Weigand

SECTION IV Behavioral Finance 565

Chapter 19 Behavioral Biases 567
Michael M. Pompian

Chapter 20 Investor Psychology 584

Mark Andrew Lim

Chapter 21 Are Two Heads Better Than One? 596

James Montier

Chapter 22 The Anatomy of a Bubble 604

James Montier

Chapter 23 De-Bubbling: Alpha Generation 616

James Montier
Chapter 24 Behavioral Techniques 638
Perry J. Kaufman

SECTION V Volatility Analysis 669

Chapter 25 The VIX as a Stock Market Indicator 671
Russell Rhoads

Chapter 26 Hedging with VIX Derivatives 687

Russell Rhoads

Chapter 27 Advanced Techniques 701

Perry J. Kaufman

SECTION V
  I Classical Methods 749
Chapter 28 Pattern Recognition 751
Perry J. Kaufman

Chapter 29 Multiple T ime F rames 777

Perry J. Kaufman

Chapter 30 Candlestick Analysis 789

Mark Andrew Lim vii
Chapter 31 Progressive Charting 838

Contents
Steve Nison

Chapter 32 Bringing It All Together: Real-World Charts 879

Steve Nison

Chapter 33 Conclusions905
Richard J. Bauer Jr. and Julie R. Dahlquist