Practical Portfolio Performance Measurement and Attribution (The Wiley Finance Series)

Practical Portfolio Performance Measurement and Attribution......Page 4
Contents......Page 10
About the Author......Page 15
Acknowledgements......Page 16
Why measure portfolio performance?......Page 18
The purpose of this book......Page 19
Reference......Page 20
Simple return......Page 22
Simple internal rate of return......Page 24
Modified internal rate of return......Page 25
Simple Dietz......Page 26
ICAA method......Page 28
Modified Dietz......Page 29
True time-weighted......Page 30
Unit price method......Page 32
Time-weighted versus money-weighted rates of return......Page 33
Index substitution......Page 35
Regression method (or ß method)......Page 36
Analyst’s test......Page 37
Linked modified Dietz......Page 38
Which method to use?......Page 39
Self-selection......Page 40
Annualized returns......Page 42
Continuously compounded returns......Page 45
Gross- and net-of-fee calculations......Page 46
Performance fees......Page 47
Portfolio component returns......Page 49
Component weight......Page 50
Multi-period component returns......Page 51
Base currency and local returns......Page 52
References......Page 53
Benchmark attributes......Page 56
Index turnover......Page 57
Customized (or composite) indexes......Page 58
Fixed weight and dynamized benchmarks......Page 59
Blended (or spliced) indexes......Page 61
Percentile rank......Page 62
Notional funds......Page 63
Excess return......Page 64
Geometric excess return......Page 65
Definition of risk......Page 70
Mean absolute deviation......Page 71
Standard deviation......Page 72
Sharpe ratio (reward to variability)......Page 73
Risk-adjusted return: M(2)......Page 75
M(2) excess return......Page 76
Differential return......Page 77
Regression analysis......Page 78
Beta (ß) (systematic risk or volatility)......Page 79
Beta timing ratio......Page 80
Correlation (r)......Page 81
Treynor ratio (reward to volatility)......Page 83
Appraisal ratio (Sharpe ratio adjusted for systematic risk)......Page 85
Diversification......Page 86
Relative risk......Page 87
Information ratio (or modified Sharpe ratio)......Page 88
Kurtosis......Page 91
Downside risk......Page 92
M(2) for Sortino......Page 93
Volatility skewness......Page 94
Value at Risk (VaR)......Page 95
Duration......Page 97
Effective duration......Page 98
Which risk measures to use?......Page 99
Risk control structure......Page 100
References......Page 102
5 Performance Attribution......Page 104
Brinson, Hood and Beebower......Page 105
Security (or stock) selection......Page 106
Interaction......Page 107
Brinson and Fachler......Page 111
Interaction......Page 113
Geometric excess return attribution......Page 115
Asset allocation......Page 116
Stock selection......Page 117
Sector weights......Page 118
Buy-and-hold (or holding-based) attribution......Page 121
Carino......Page 122
Menchero......Page 125
GRAP method......Page 129
Frongello......Page 130
Davies and Laker......Page 132
Multi-period geometric attribution......Page 136
Risk-adjusted attribution......Page 138
Selectivity......Page 139
Ankrim and Hensel......Page 142
Karnosky and Singer......Page 148
Naive currency attribution......Page 152
Compounding effects......Page 156
Interest-rate differentials......Page 158
Currency allocation......Page 159
Cost of hedging......Page 161
Currency timing (or currency selection)......Page 163
Other currency issues......Page 166
Fixed income attribution......Page 167
Weighted duration attribution......Page 168
Attribution standards......Page 175
Evolution of performance attribution methodologies......Page 176
References......Page 177
Why do we need performance presentation standards?......Page 180
Advantages for asset managers......Page 181
The standards......Page 182
Investment Performance Council......Page 184
Country Standards Subcommittee (CSSC)......Page 185
Interpretation Subcommittee......Page 186
Carve-outs......Page 187
Portability......Page 188
Achieving compliance......Page 189
Maintaining compliance......Page 190
Reference......Page 191
Appendix A Simple Attribution......Page 192
Appendix B Multi-currency Attribution Methodology......Page 195
Appendix C EIPC Guidance for Users of Attribution Analysis......Page 203
Appendix D European Investment Performance Committee – Guidance on Performance Attribution Presentation......Page 208
Appendix E The Global Investment Performance Standards......Page 221
Bibliography......Page 232
Index......Page 236