See what Prof. William Sharpe has to say about linear factor models . If you encounter some new words, check this glossary . There are numerous statistical resources available on the Web to help with research projects. It is also a good idea to be aware of organizations like the Chicago Quantitative Alliance , and to keep an eye on publications like Efficient Frontier . If you are feeling academic, take a look at this NYU Quantitative Finance Server .
Portfolio optimization is used by quant shops to balance risk and return.
Unfortunately, it is not the easiest procedure to understand. See how Prof. Sharpe is bringing risk control to the masses with Financial Engines . Lastly, The Optimization Technology Center offers a nice explanation of quadratic optimization. Windows APT Ltd. Software based on arbitrage pricing theory. A collection of applications, utilities and tools for portfolio management, backtesting, risk optimization and reporting.