Portfolio Performance Measurement and Benchmarking 1st edition by Jon Christopherson, David Carino, Wayne Ferson – Ebook PDF Instant Download/Delivery: 0071713662, 9780071713665
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ISBN 10: 0071713662
ISBN 13: 9780071713665
Author: Jon Christopherson, David Carino, Wayne Ferson
In order to make sound investment choices, investors must know the projected return on investment in relation to the risk of not being paid. Benchmarks are excellent evaluators, but the failure to choose the right investing performance benchmark often leads to bad decisions or inaction, which inevitably results in lost profits. The first book of its kind, Portfolio Performance Measurement and Benchmarking is a complete guide to benchmarks and performace evaluation using benchmarks. In one inclusive volume, readers get foundational coverage on benchmark construction, as well as expert insight into specific benchmarks for asset classes and investment styles. Starting with the basics—such as return calculations and methods of dealing with cash flows—this thorough book covers a wide variety of performance measurement methodologies and evaluation techniques before moving into more technical material that deconstructs both the creation of indexes and the components of a desirable benchmark. Portfolio Performance Measurement and Benchmarking provides detailed coverage of benchmarks for: U.S. equities Global and international equities Fixed income Real estate The team of renowned authors offers illuminating opinions on the philosophy and development of equity indexes, while highlighting numerous mechanical problems inherent in building benchmarks and the implications of each one. Before you make your next investment, be certain your return will be worth the risk with Portfolio Performance Measurement and Benchmarking.
Portfolio Performance Measurement and Benchmarking 1st Table of contents:
Chapter 1 What Is Performance and Benchmarking?
The Basic Issue: Has Your Wealth Increased?
Was the Change in Wealth Worth the Risk?
Comparing Return with Alternative Investment Returns
Active Investing versus Passive Investing
Performance Attribution
Chapter 2 Asset Class Return Expectations
The Expected Range of Returns from Different Kinds of Investments
What Range of Values Is Likely to Be Encountered?
Chapter 3 Returns Without Cash Flows
Portfolio Market Value
Holding Period Return
Linking Returns
Rule of 72
Chapter 4 Average Returns
Average Return Per Period
Annualized Return
Compounding Frequency
Expected Return
Chapter 5 Returns in the Presence of Cash Flows
Cash Flows
Unit Value Method
Time-Weighted Return
Linked Internal Rate of Return
The Dietz Method
Subportfolio Returns and Consistency
Time-Weighted versus Money-Weighted Returns
Chapter 6 Comparing Two Portfolio Returns
Excess Returns Over a Benchmark—Past Performance
Compound Excess Return
Situations Where the Arithmetic Excess Return Is the Appropriate Choice
Recommended Practice
Chapter 7 Some Foundations
The Risk-Free Rate
Market Equilibrium
The CAPM of Sharpe, Lintner, and Mossin
Arbitrage Pricing Theory (APT) and Other Asset Pricing Models
Chapter 8 Estimating the Elements of the CAPM
The CAPM with Constant Alpha and Beta Over Time
Problems with the Use of Inappropriate Benchmarks
Other Estimation Problems
Chapter 9 What Is Risk?
Types of Risk
A Basic Measure of Risk as Volatility in Returns
Measuring Bad Variation
Covariance
Tracking Error and Residual Risk
Chapter 10 Risk-Adjusted Return Measures
Sharpe Ratio
Sortino Ratio
Modigliani-Modigliani Measure
Jensen’s Alpha
Treynor’s Measure
Appraisal Ratio and Information Ratio
Comparing the Risk-Adjusted Measures
Chapter 11 Fixed-Income Risk
Duration: Macaulay, Modified, and Effective Duration
Convexity
Prepayment Risk for Mortgages and Callables
Issuer-specific Risk, Default Risk, and Correlated Default Risk
Chapter 12 Conditional Performance Evaluation
Models for Performance Measurement
Logic of Conditional Performance Evaluation
Unconditional Alphas and Betas
Time-Varying Conditional Betas
Time-Varying Conditional Alphas
Benchmark Portfolios
Implications for Investors
Chapter 13 Market Timing
Merton- Henriksson Market Timing Model
Treynor- Mazuy Model
Up/Down Market Model: Up Market versus Down Market Beta
The Problem of Non-Timing-Related Nonlinearities
Chapter 14 Factor Models
The Single Index Model
Multiple Factor Models
Factor Model Analytics
A Simple Example
Chapter 15 Factors of Equity Returns in the United States
Various Factor Model Factors
The Barra Factors
Factor-Mimicking Portfolios: High-Low Approach and Factor Extraction Approach
Chapter 16 Factor Model ( Barra) Performance Attribution
Attribution “Executive Summary”
Total Annualized Attribution Chart
Annual Attribution Report
Annualized Contributions to Risk Indexes
Industries: Top-10 and Bottom-10 Contributors to Active Return
Asset Selection: Annualized Attribution
Chapter 17 Contributions to Return
Chapter 18 Performance Attribution
Sector-Based Attribution Framework
Single-Period Arithmetic Sector-Based Attribution
Chapter 19 Linking Attribution Effects
Multiperiod Contributions to Return
Excess Return Recursion
An Idealized Attribution System
Logarithmic Linking Coefficients
A Link to Recursive Methods
Other Methods
Example
Other Topics
Notes
References
Chapter 20 Benchmarks and Knowledge
Peer Universes
Passive Market Indexes
Manager-Specific Stock-Matching Benchmark: Normal Portfolios
For What Should a Manager Be Given Credit?
Chapter 21 Elements of a Desirable Benchmark
Origins of U.S. Equity Benchmarks
The Fundamental Meaning and Purposes of a Financial Index
Where You Stand on the “Best” Indexes Depends on Where You Sit
The Best Index Is Based on Four Principles of Useful Indexes
Desirability Trade-Offs
Issues with Index Construction
The Paradox of Asset Management
Chapter 22 Index Weighting
Advantages and Disadvantages of Capitalization Weighting
Portfolio Equity Characteristics: Capitalization Weighting versus Equal Weighting
Challenges to Capitalization Weighting
Chapter 23 Practical Issues with Building Indexes
Index Calculations
Decisions That Have to Be Made by the Index Creator
Russell U.S. Equity Index Construction
Chapter 24 Styles, Factors, and Equity Benchmarks
Defining Equity Style
Types of Equity Styles
Evidence of Styles
Historical Perspective on Styles
CAPM, Factor Models, and the Behavior of Styles
Which Equity Style Is Best?
Chapter 25 Equity Style Indexes: Tools for Better Performance Evaluation and Plan Management
Introduction
Style Definitions
Performance Evaluation and Styles
Style Index Construction
Validation of Style Indexes
Uses of the Style Indexes
Conclusion
Chapter 26 Russell Style Index Methodology
Style Index Algorithm
Rationale for Key Features
Chapter 27 U.S. Equity Benchmarks
S&P and S&P/Citigroup Family of Indexes
Dow Jones Indexes
Russell Indexes
MSCI Family of Indexes
CRSP Composite and Decile Indexes
Other Indexes: NYSE and NASDAQ Indexes
Comparing Index Construction Issues
Index Comparisons
Conclusion
Chapter 28 Global and International Equity Benchmarks
Global versus International
MSCI Index Family
Dow Jones Global Indexes
S&P/Citigroup Global Indexes
FTSE Index Family
Russell/Nomura Indexes
Russell Global Indexes
Conclusion
Chapter 29 Fixed-Income Benchmarks
Fixed-Income Benchmark Construction Difficulties
Barclays Capital Family of Global Fixed-Income Indexes
Merrill Lynch Fixed-Income Index Family
J.P. Morgan Family of Fixed-Income Indexes
Chapter 30 Real Estate Benchmarks
Real Estate Index Construction Issues
Private Real Estate Indexes
Publicly Traded Real Estate Security Indexes
Chapter 31 Hedge Fund Universes
Hedge Funds as Absolute Return Strategies
Hedge Fund Indexes
Building a Good Hedge Fund Index
Inherent Problems with Universes of Hedge Funds
Available Hedge Fund Indexes
Chapter 32 Determining Investment Style
Approaches to the Style Classification Problem
Effective Mix: A Returns-Based Methodology
Effective Mix Limitations and Maximizing Usefulness
Conclusion
Chapter 33 GIPS: Global Investment Performance Standards
The Reason for GIPS
Overview of GIPS
Index
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Jon Christopherson,David Carino,Wayne Ferson,Portfolio Performance,Measurement and Benchmarking