Benchmarking Alternative Investments
Hedge Funds Three general types of benchmarks could be considered for hedge funds: (1) broad market indexes, (2) risk-free rate, …
Benchmarking Investments and Managers
In investment practice, we use benchmarks as reference points for segments of the sponsor’s portfolio, communication of instructions to the …
Return Attribution Analysis at Multiple Levels
The return attribution presented in the Brinson examples focused on the bottom-up approach, where the attribution effects were calculated at …
Risk Attribution
Selecting the most appropriate risk metric for attribution analysis requires an in-depth understanding of the investment process of the portfolio …
Approaches to Return Attribution
Arithmetic Attribution and Geometric Attribution Return attribution lets us identify which investment decisions taken by the fund manager were successful …
Performance Attribution
Performance attribution is a critical component of the portfolio evaluation process. Effective performance attribution analysis requires a thorough understanding of …
Components of Performance Evaluation
Performance evaluation includes three primary components, each corresponding to a specific question we need to answer to evaluate a portfolio’s …
Evaluating Trade Execution
Trade Cost Measurement Trading costs are either explicit in that they are easily visible or implicit in that they are …
Trade Execution
Once the appropriate trade strategy is determined by the portfolio manager and the trader, the trade must be executed in …
Trading Strategies and Strategy Selection
Trade Motivations Profit seeking. Active portfolio managers seek to outperform their benchmark (trading securities they believe to be mispriced. Managers need …