Handbook of Finance: Investment Management and Financial Management

Chapter 22. Introduction to Performance Analysis

NOËL AMENC, PhD

Professor of Finance, Edhec Graduate School of Business Director, Edhec Risk and Asset Management Research Centre

FELIX GOLTZ

Senior Research Engineer, Edhec Risk and Asset Management Research Centre

LIONEL MARTELLINI, PhD

Professor of Finance, Edhec Graduate School of Business Scientific Director, Edhec Risk and Asset Management Research Centre

VÉRONIQUE LE SOURD

Senior Research Engineer, Edhec Risk and Asset Management Research Centre

Abstract: Performance analysis, which is the final stage in the portfolio management process, is a major concern for both investors and portfolio managers. It provides an overall evaluation of the success of the investment process in reaching its objective. In so doing, it allows managers to evolve toward better control of the investment process and provides them with the means to improve it. Performance analysis covers all techniques, ranging from simple measure of the difference in the value of the portfolio between the beginning and the end of the evaluation period, to performance attribution of the contribution of each phase in the investment process to the overall portfolio performance, also including managers' skill evaluation.

Keywords: performance measurement, performance attribution, indices, benchmarks, alpha, style analysis, rating

Performance measurement is central to the management delegation process. Managers must respond to two of their clients' concerns. On the one hand, this ...