Performance Measurement in Finance

✍ Scribed by John Knight, Stephen Satchell

• Publisher: Butterworth-Heinemann
• Year: 2002
• Tongue: English
• Leaves: 395
• Series: Quantitative finance
• Edition: 1
• Category: Library

✦ Synopsis

The distinction between out-performance of an Investment fund or plan manager vs rewards for taking risks is at the heart of all discussions on Investment fund performance measurement of fund managers. This issue is not always well-understood and the notion of risk adjusting performance is not universally accepted. Performance Measurement in Finance addresses this central issue. The topics covered include evaluation of investment fund management, evaluation of the investment fund itself, and stock selection performance. The book also surveys and critiques existing methodologies of performance measurement and covers new innovative approaches to performance measurement. The contributors to the text include both academics and practitioners providing comprehensive coverage of the topic areas. Performance Measurement in Finance is all about how to effectively measure financial performance of the fund manager and investment house managers, what measures need to be put in place and technically what works and what doesn't. It covers risk, and what's acceptable and what isn't, how, in short, to manage risk. Includes practical information to enable Investment/Portfolio Managers to understand and evaluate fund managers, the funds themselves, and Investment firmsProvides a full overview of the topic as well as in-depth technical analysis

✦ Table of Contents

INTRODUCTION......Page 18
THE TREYNOR MEASURE......Page 21
THE JENSEN MEASURE......Page 22
THE TREYNOR – MAZUY MEASURE......Page 28
PARAMETRIC AND NON-PARAMETRIC TESTS OF MARKET TIMING ABILITIES......Page 30
THE POSITIVE PERIOD WEIGHTING MEASURE......Page 36
CONDITIONAL PERFORMANCE EVALUATION......Page 37
THE 4-INDEX MODEL OF PERFORMANCE EVALUATION......Page 39
CARHART’S 4-FACTOR MODEL......Page 40
RISK-ADJUSTED PERFORMANCE......Page 41
STYLE/RISK-ADJUSTED PERFORMANCE......Page 42
THE SHARPE STYLE ANALYSIS......Page 43
THREE INNOVATIVE MEASURES THAT CAPTURE THE DIFFERENT FACES OF A MANAGER’S SUPERIOR ABILITIES......Page 44
DYNAMICS OF PORTFOLIO WEIGHTS: PASSIVE AND ACTIVE MANAGEMENT......Page 48
THE PORTFOLIO CHANGE MEASURE......Page 51
THE MOMENTUM MEASURES......Page 55
THE HERDING MEASURES......Page 57
STOCKHOLDINGS AND TRADES MEASURE......Page 60
CONCLUSION......Page 63
REFERENCES......Page 64
2 Performance evaluation: an econometric survey......Page 67
INTERNATIONAL EMPIRICAL RESULTS OF PERFORMANCE......Page 84
CONCLUSION AND FUTURE RESEARCH......Page 86
REFERENCES......Page 87
3 Distribution of returns generated by stochastic exposure: an application to VaR calculation in the futures markets......Page 90
INTRODUCTION......Page 91
DISTRIBUTION OF PERFORMANCE RETURNS......Page 92
IMPLICATIONS FOR VAR CALCULATIONS......Page 95
ACTIVELY TRADING THE FUTURES MARKETS......Page 96
CONCLUSION......Page 105
REFERENCES......Page 106
INTRODUCTION......Page 108
TRADITIONAL PERFORMANCE MEASURES......Page 109
A NEW PERFORMANCE MEASURE......Page 111
SAMPLING ERROR......Page 114
HEDGE FUNDS AND HEDGE FUND RETURNS......Page 116
EVALUATION OF HEDGE FUND INDEX PERFORMANCE......Page 119
CONCLUSION......Page 122
REFERENCES......Page 123
5 Performance benchmarks for institutional investors: measuring, monitoring and modifying investment behaviour......Page 125
WHAT BENCHMARKS ARE CURRENTLY USED BY INSTITUTIONAL INVESTORS?......Page 126
WHAT ARE THE ALTERNATIVES?......Page 141
BENCHMARKS BASED ON LIABILITIES......Page 145
WHAT HAPPENS IN OTHER COUNTRIES?......Page 152
CONCLUSION......Page 154
APPENDIX: DERIVING THE POWER FUNCTION......Page 155
REFERENCES......Page 157
6 Simulation as a means of portfolio performance evaluation......Page 159
INTRODUCTION......Page 160
OBJECTIVES OF SIMULATIONS......Page 162
ADVANTAGES OF SIMULATION......Page 163
EXAMPLES OF PORTFOLIO SIMULATION......Page 164
APPLICATIONS......Page 174
SUMMARY AND CONCLUSIONS......Page 176
7 An analysis of performance measures using copulae......Page 177
INTRODUCTION......Page 178
PERFORMANCE MEASURES......Page 179
EMPIRICAL RESULTS......Page 183
COPULAE......Page 197
AN AGGREGATE PERFORMANCE MEASURE......Page 210
CONCLUSIONS......Page 212
REFERENCES......Page 213
INTRODUCTION......Page 215
THE PORTFOLIO......Page 216
THE DATA......Page 217
THE ANALYSES......Page 218
ACKNOWLEDGEMENT......Page 243
REFERENCES AND FURTHER READING......Page 244
INTRODUCTION......Page 246
INVESTMENT OPPORTUNITY SETS WITH CONTINUOUS RISK STRUCTURES......Page 249
MEASURING THE PERFORMANCE OF INVESTMENT OPPORTUNITY SETS......Page 251
RATIONALITY RESTRICTIONS ON CONDITIONAL RETURN MOMENTS AND GMM ESTIMATION......Page 255
EMPIRICAL ANALYSES......Page 263
CONCLUDING REMARKS......Page 272
REFERENCES AND FURTHER READING......Page 273
10 Performance measurement of portfolio risk based on orthant probabilities......Page 278
INTRODUCTION......Page 279
ORTHANT PROBABILITY DESCRIPTION OF PORTFOLIO DISTRIBUTIONS......Page 281
IMPLICATIONS FOR ABSOLUTE AND RELATIVE RISK......Page 288
EMPIRICAL COMPARISONS USING SIMULATED LONG/SHORT INVESTMENT STRATEGIES......Page 291
CONCLUSIONS......Page 299
REFERENCES......Page 300
INTRODUCTION......Page 302
A MODEL WITH LINEAR TECHNOLOGIES......Page 312
A MARKET MODEL......Page 322
EXTENSIONS......Page 333
CONCLUDING REMARKS......Page 334
APPENDIX......Page 335
REFERENCES......Page 343
INTRODUCTION......Page 346
ALTERNATIVE METHODOLOGIES TO MEASURE PERFORMANCE......Page 348
CONTRASTING THE METHODS......Page 349
CONCLUSION - SUMMARIZING THE FINDINGS......Page 356
REFERENCES......Page 358
INTRODUCTION......Page 359
PREVIOUS EVIDENCE ON PERFORMANCE OF MANAGED FUNDS......Page 360
MEASURING FUND PERFORMANCE......Page 363
DATA......Page 365
RESULTS......Page 369
CONCLUSIONS......Page 378
ACKNOWLEDGEMENTS......Page 380
REFERENCES......Page 381
Index......Page 384