portfolio performance evaluation

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1、FinalPDFtoprinterCHAPTERTWENTY-FOURPortfolioPerformanceEvaluation244MOSTFINANCIALASSETS aremanagedevaluationmethodisaslargeasthatofmar-byprofessionalinvestors,whothusatleastketefficiency.indirectlyallocatethelion’sshareofcapitalHowcanweevaluatetheperformanceofacrossfirms.Ef

2、ficientallocationthereforeaportfoliomanager?Itturnsoutthatevendependsonthequalityoftheseprofes-anaverageportfolioreturnisnotasstraight-sionalsandthepropensityoffinancialmar-forwardtomeasureasitmightseem.Inketstodirectcapitaltothebeststewards.addition,adjustingaveragereturns

3、forriskTherefore,ifcapitalmarketsaretoberea-presentsahostofotherproblems.Intheend,sonablyefficient,investorsmustbeableperformanceevaluationisfarfromtrivial.tomeasuretheperformanceoftheirassetWebeginwiththemeasurementofport-managers.Andsuchmeasurementmustbefolioreturns.Fromt

4、herewemoveontocon-sufficientlyaccuratetoallowaproperrankventionalapproachestoriskadjustment.Weorderingoftheirability.Ataminimum,effi-identifytheproblemswiththeseapproachesciencydemandsthatperformanceevaluationwhenappliedinvariousreal-lifesituations.beaccurateenoughtodisting

5、uishmanagersWethenturntosomepracticalprocedureswho(netoffees)areinferiortoarandomlyforperformanceevaluationinthefieldsuchchosen,diversifiedportfolio.Thus,thesocialasstyleanalysis,theMorningstarStarRatings,benefitofareasonablyreliableperformanceandin-houseperformanceattribut

6、ion.PARTVII24.1TheConventionalTheoryofPerformanceEvaluationAverageRatesofReturnWedefinedtheholding-periodreturn(HPR)inSection5.1ofChapter5andexplainedthedifferencesbetweenarithmeticandgeometricaverages.Supposeweevaluatetheper-formanceofaportfoliooveraperiodof5yearsfrom20qua

7、rterlyratesofreturn.Thearithmeticaverageofthissampleofreturnswouldbethebestestimateoftheexpectedbod61671_ch24_835-881.indd8357/25/133:13AMFinalPDFtoprinter836PARTVIIAppliedPortfolioManagementrateofreturnoftheportfolioforthenextquarter.Incontrast,thegeometricaverageisthecons

8、tantquarterlyreturnoverthe20quartersthatwouldyieldthesametotalcumulativereturn.The