CHAPTER 8 Performance Measurement and Attribution
Investment advisors and consultants should be able to calculate numerous risk and performance metrics including: absolute and relative performance measurements, rolling period and annual returns, time-weighted and dollar-weighted returns, and arithmetic and geometric returns. They must also understand the application and implications of these tools and should be able to communicate such to their clients accurately and clearly.
Measuring and analyzing risk-adjusted performance is critical for understanding the effectiveness of individual investments and managers, and how their performance interacts with other investments within a portfolio. This chapter focuses on identifying useful risk and performance metrics, identifying appropriate benchmarks, and reviewing methods for measuring and analyzing specific determinants of individual and portfolio investment performance.
Investment professionals should have a solid understanding of various methods of analyzing and evaluating various investment strategies, styles, and managers. The readings in this chapter describe numerous quantitative methods for evaluating risk-adjusted performance and describe tools designed to show us the origins of both outperformance and underperformance. The authors discuss the concepts behind each measurement and walk through the math using numerous examples and formulae.
Part I Investments: Principles of Portfolio and Equity Analysis—Portfolio Risk and ...
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