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Performance Evaluation and Attribution of Security Portfolios

Book Description

Just how successful is that investment?  Measuring portfolio performance requires evaluation (measuring portfolio results against benchmarks) and attribution (determining individual results of the portfolio's parts),   In this book, a professor and an asset manager show readers how to use theories, applications, and real data to understand these tools. Unlike others, Fischer and Wermers teach readers how to pick the theories and applications that fit their specific needs.  With material inspired by the recent financial crisis, Fischer and Wermers bring new clarity to defining investment success. 



  • Gives readers the theories and the empirical tools to handle their own data
  • Features practice problems formerly from the CFA Program curriculum.

Table of Contents

  1. Cover image
  2. Title page
  3. Table of Contents
  4. Introduction to the Series
  5. Copyright
  6. Preface
  7. Section 1: Performance Evaluation
    1. Chapter 1. An Introduction to Asset Pricing Models
      1. 1.1 Historical Asset Pricing Models
      2. 1.2 The Beginning of Modern Asset Pricing Models
      3. 1.3 Efficient Markets
      4. 1.4 Studies That Attack the CAPM
      5. 1.5 Does proving the CAPM wrong = Market inefficiency? Or, do efficient markets = the CAPM is correct?
      6. 1.6 Small Capitalization and Value Stocks
      7. 1.7 The Asset Pricing Models of Today
      8. 1.8 Chapter-End Problems
      9. References
    2. Chapter 2. Returns-Based Performance Evaluation Models
      1. 2.1 Introduction
      2. 2.2 Goals, Guidelines, and Perils of Performance Evaluation
      3. 2.3 Returns-Based Analysis
      4. 2.4 Chapter-End Problems
      5. References
    3. Chapter 3. Returns-Based Performance Measures
      1. 3.1 Introduction
      2. 3.2 Luck vs. Skill
      3. 3.3 The Ultimate Goal of Performance Measures
      4. 3.4 Two Non-Regression Approaches
      5. 3.5 Regression-Based Performance Measures
      6. 3.6 Chapter-End Problems
      7. References
    4. Chapter 4. Portfolio-Holdings Based Performance Evaluation
      1. 4.1 Introduction
      2. 4.2 Unconditional Holdings-Based Performance Measurement
      3. 4.3 Conditional Holdings-Based Performance Measurement
      4. 4.4 Chapter-End Problems
      5. References
    5. Chapter 5. Combining Portfolio-Holdings-Based and Returns-Based Performance Evaluation (and the “Return Gap”)
      1. 5.1 Introduction
      2. 5.2 Performance-Decomposition Methodology
      3. 5.3 Application to U.S. Domestic Equity Mutual Funds
      4. 5.4 Empirical Results for U.S. Domestic Equity Mutual Funds
      5. 5.5 Results for U.S. Domestic Corporate BOND Mutual Funds
      6. 5.6 Appendix A
      7. 5.7 Appendix B
      8. 5.8 Chapter-End Problems
      9. References
    6. Chapter 6. Performance Evaluation of Non-Normal Portfolios
      1. 6.1 Introduction
      2. 6.2 Bootstrap Evaluation of Fund Alphas
      3. 6.3 Data
      4. 6.4 Results for U.S. Equity Funds
      5. 6.5 Sensitivity Analysis
      6. 6.6 Performance Persistence
      7. 6.7 Chapter-End Problems
      8. References
    7. Chapter 7. Fund Manager Selection Using Macroeconomic Information
      1. 7.1 Introduction
      2. 7.2 A Dynamic Model of Managed Fund Returns
      3. 7.3 Empirical Example: U.S. Domestic Equity Fund Data
      4. 7.4 Empirical Example: Results for U.S. Domestic Equity Funds
      5. 7.5 Chapter-End Problems
      6. Appendix A Description of Mutual Fund Database
      7. Appendix B Investments when fund risk loadings and benchmark returns may be predictable
      8. Appendix C Investments when skills may be predictable
      9. References
    8. Chapter 8. Multiple Fund Performance Evaluation: The False Discovery Rate Approach
      1. 8.1 Introduction
      2. 8.2 The Impact of Luck on Managed Fund Performance
      3. 8.3 An Empirical Example: U.S. Domestic Equity Mutual Funds
      4. 8.4 An Empirical Example: Results for U.S. Domestic Equity Funds
      5. 8.5 Chapter-End Problems
      6. References
    9. Chapter 9. Active Management in Mostly Efficient Markets: A Survey of the Academic Literature
      1. 9.1 Introduction
      2. 9.2 Some Caveats
      3. 9.3 Does Active Management Add Value?
      4. 9.4 Active Management and “Mostly Efficient Markets”
      5. 9.5 Identifying Superior Active Managers (‘SAM’s)
      6. 9.6 Conclusions
      7. 9.7 Chapter-End Problems
      8. References
  8. Section 2: Performance Analysis and Reporting
    1. Chapter 10. Basic Performance Evaluation Models
      1. 10.1 Basis Formula for the Calculation of Returns
      2. 10.2 Geometric Linkage and Scaling of Returns
      3. 10.3 Internal Rate of Return
      4. 10.4 Time-Weighted Return
      5. 10.5 Comparison Between the Time-Weighted Return and the Internal Rate of Return
      6. 10.6 Approximation Methods for the Computation of the Time-Weighted Return
      7. 10.7 Active Return
      8. 10.8 Continuously Compounded Returns
      9. Appendix A Equality between the Time-Weighted Return and the Internal Rate of Return
      10. Appendix B Solving Polynomial Equations for the Determination of Internal Rate of Return
      11. Appendix C Time-Weighted Return and the Unit Price Method
    2. Chapter 11. Indices and the Construction of Benchmarks
      1. 11.1 Basic Concepts
      2. 11.2 Equity Indices
      3. 11.3 Bond Indices
      4. 11.4 Money Market Indices
      5. 11.5 Peer Group Comparisons and Fund Universes
      6. 11.6 Benchmarks for Portfolios Investing in Multiple Asset Classes
      7. 11.7 Chapter-End Problems
    3. Chapter 12. Attribution Analysis for Equity Portfolios According to the Brinson Approach
      1. 12.1 Introduction to Attribution Analysis
      2. 12.2 Single-Period Attribution Analysis According to the Brinson Approach
      3. 12.3 Multi-period Attribution Analysis According to Brinson et al.
      4. 12.4 Attribution Analysis in a Geometric Form
      5. 12.5 Further Aspects of Attribution Analysis
    4. Chapter 13. Attribution Analysis for Fixed Income Portfolios
      1. Appendix: Duration Measures
      2. 13.5 Exercises for Chapter-End Problems
    5. Chapter 14. Analysis of Multi-Asset Class Portfolios and Hedge Funds
      1. 14.1 Basic Considerations
      2. 14.2 Attribution Analysis on Two Levels
      3. 14.3 Attribution Analysis on Three Levels
      4. 14.4 Implementation in practice
      5. 14.5 Risk-Adjusted Attribution Analysis Based On the Systematic Risk
      6. 14.6 Risk-Adjusted Attribution Analysis Based on the Information Ratio
      7. 14.7 Special Aspects in the Analysis of Hedge Funds
      8. 14.8 Chapter-End Problems
    6. Chapter 15. Attribution Analysis with Derivatives
      1. 15.1 Attribution Analysis with Derivative-Based Currency Management
      2. 15.2 Treatment of Futures and Forwards
      3. 15.3 Treatment of Options
      4. 15.4 Swaps
      5. 15.5 Chapter-End Problems
    7. Chapter 16. Global Investment Performance Standards (GIPS)
      1. 16.1 Background
      2. 16.2 Definition of Firm
      3. 16.3 Creation of Composites
      4. 16.4 Determination of Composite Return
      5. 16.5 Further Disclosure Requirements for Composite Structure and Sample Presentations
      6. 16.6 Maintenance of Composites
      7. 16.7 Independent Verification of Compliance with the Standards
      8. 16.8 Measurement of the Homogeneity of the Investment Process
      9. 16.9 Presentation of Risks according to the GIPS
      10. 16.10 Chapter-End Problems
    8. Index