- The revised eighth edition of Foundations for Scientific Investing is available (ISBN 978-0-9951173-0-3),
along with the fourth edition of Foundations for Scientific Investing: Multiple-Choice, Short-Answer, and Long-Answer Test Questions
(ISBN 978-0-9941386-7-5). The latter book contains 580 questions and answers to reinforce the material in the book.
Ordering details appear below.
- This revised eighth edition lays a firm foundation for thinking about and conducting investment.
It does this by helping to build capital markets intuition and critical thinking skills.
The material in this book is the product of 25+ years of investment research and experience (academic, personal, and professional),
and 20+ painstaking years of destructive testing in university classrooms. Although the topic is
applied investments, the integration of finance, economics, accounting, pure mathematics,
statistics, numerical techniques, and spreadsheets (or programming) make this an ideal
capstone course at the advanced undergraduate or master's/MBA level.
The book has a heavily scientific/quantitative focus, but the material should be accessible
to a motivated practitioner or talented individual investor with only high school level mathematics.
- Although aimed at the advanced undergraduate or master's/MBA level, the careful explanations
of a wide range of advanced capital markets topics makes this an excellent book for a
U.S. PhD student in need of an easily accessible foundation course in capital markets
theory and practice. There are literature reviews of multiple advanced areas, and many
research questions are identified that need to be answered to fill gaps in the literature;
these research questions would be ideal for a master's thesis or a chapter of a PhD.
- The applied nature of the book also makes it ideal for capital markets practitioners.
For example, in one exercise, the reader is taken by the hand and walked through construction
of a worked spreadsheet example of an active alpha optimization using actual stock market data.
The reader gets to build ex-ante alphas, and feed them into an optimization that weighs
returns, risk, and transaction costs. A portfolio is rebalanced based on the optimization, and
ultimately a backtest is conducted to measure ex post alpha.
- Other practitioner material includes advanced time value of money exercises, a review of
retirement topics, and extensive discussions of dividends, P/E ratios, transaction costs,
the CAPM, value versus growth versus glamour, and a review of more than 100 years of stock
market performance, and more than 200 years of interest rates. New sections discuss smart beta, factor-based investing, EMH tests, degrees of freedom, a half-dozen good reasons for
holding active funds even if they underperform their benchmarks after fees (along with plenty of good
reasons for holding passive funds instead where available!).
- Every investor needs capital markets intuition and critical thinking skills to conduct confident,
deliberate, and skeptical investment. The overarching goal of this book is to help investors build these skills.
- The book is broken into four main sections:
- Foundations I: Quantitative
(Maths and Stats, etc).
- Foundations II: Financial Economics
(Returns, TVM, Fundamental/Technical Analysis, Transaction Costs, Dividends, Active
Return and Risk, P/E ratio, Enterprise Value and Enterprise Ratio, Retirement Topics, etc).
- Financial Theories and Empirical Evidence
(Random Walk, Efficient Markets,
Modern Technical Analysis, CAPM Fama-French and Ferguson-Shockley, etc).
- Active Investment Topics
(ETFs, Value vs Growth, Hedge and Long-Short Funds, DB/DC Plans, Accruals, Absolute Returns, Fundamental
Indexation, Low-Beta Strategies, smart beta, factor-based investing, LDI, Portable Alpha, Personal Trading, etc).
- What makes this book different from other investments books? (PDF file; 5 pages)
- Click here to see front cover image.
- Dr. Timothy Falcon Crack did PhD coursework at MIT and Harvard, and graduated with a PhD in Financial Economics from MIT.
He has degrees in Mathematics (with a lot of Statistics), Finance, and Financial Economics and a diploma in Accounting/Finance.
He also holds the Investment Management Certificate from the UK Society of Investment Professionals.
He has won six university teaching awards and been nominated for at least five others.
- Dr. Crack has published in the top academic journal in Finance (The Journal of Finance), the top
practitioner-oriented journals in Finance (The Financial Analysts Journal and The Journal of Futures Markets),
and the top pedagogical journal in Finance (The Journal of Financial Education).
He has also published in what was the top interdisciplinary Business journal (The Journal of Business).
He has written seven sole-authored finance books (the following links direct you to the latest editions for sale at Amazon.com
and Amazon.co.uk):
- Dr. Crack taught at the university level from 1985 to 2000, and again from 2004 onwards, including four
years as a front line teaching assistant for MBA students at MIT, and five years teaching undergraduate,
MBA and PhD courses at Indiana University's Kelley School of Business.
He is now a chaired full professor of Finance at the oldest university in New Zealand.
- Dr. Crack has worked as an independent consultant to the New York Stock Exchange and to a foreign
government body investigating wrong doing in the financial markets. His most recent practitioner job was as
the head of quantitative active equity research for the UK and Continental Europe in the London office of
what was the world's largest institutional asset manager.
Click here to be directed to the latest edition(s)
for sale at Amazon.com and Amazon.co.uk (as part of a list containing every book I have written plus some other favorites).
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Download Spreadsheets and Solutions....
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LEFT click on Spreadsheet names and choose "Save."
Be patient; it may take a full minute to download if the server is busy.
Note that some files differ with the edition of the book.
A padlock symbol here indicates that the file is password protected.
Look up "password" in the index of the book to find the password for any
password-protected files (or go directly to page 200 of the fourth edition for the password).
None of these spreadsheets uses VBA, or any macros, or has any embedded links to other sheets (the Osborne-2010 spreadsheet is an exception).
Approximate file sizes are given.
RIGHT click on PDF file names and choose "Save As."
1st, 2nd, and 3rd Edition of FFSI and 1st Edition of Q&A Book
4th or 5th Edition of FFSI and 2nd Edition of Q&A Book
6th-8th Editions of FFSI and 3rd and 4th Edition of Q&A Book
Last Updated: January 5, 2019
(375KB) ACTIVE-ALPHA-DATA.xls (4th-8th Edition) 