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Practical Portfolio Performance Measurement and Attribution, Second Edition

Book Description

Performance measurement and attribution are key tools in informing investment decisions and strategies. Performance measurement is the quality control of the investment decision process, enabling money managers to calculate return, understand the behaviour of a portfolio of assets, communicate with clients and determine how performance can be improved.

Focusing on the practical use and calculation of performance returns rather than the academic background, Practical Portfolio Performance Measurement and Attribution provides a clear guide to the role and implications of these methods in today's financial environment, enabling readers to apply their knowledge with immediate effect.

Fully updated from the first edition, this book covers key new developments such as fixed income attribution, attribution of derivative instruments and alternative investment strategies, leverage and short positions, risk-adjusted performance measures for hedge funds plus updates on presentation standards. Complete with a CD containing worked examples for the majority of exhibits, the book covers the mathematical aspects of the topic in an accessible and practical way, making this book an essential reference for anyone involved in asset management.

"The ebook version does not provide access to the companion files."

Table of Contents

  1. Title Page
  2. Copyright Page
  3. Dedication
  4. Acknowledgements
  5. Chapter 1 - Introduction
    1. WHY MEASURE PORTFOLIO PERFORMANCE?
    2. THE PERFORMANCE MEASUREMENT PROCESS
    3. THE PURPOSE OF THIS BOOK
    4. ROLE OF PERFORMANCE MEASURERS
    5. BOOK STRUCTURE
  6. Chapter 2 - The Mathematics of Portfolio Return
    1. SIMPLE RETURN
    2. MONEY-WEIGHTED RETURNS
    3. TIME-WEIGHTED RETURNS
    4. TIME-WEIGHTED VERSUS MONEY-WEIGHTED RATES OF RETURN
    5. APPROXIMATIONS TO THE TIME-WEIGHTED RETURN
    6. HYBRID METHODOLOGIES
    7. WHICH METHOD TO USE?
    8. SELF-SELECTION
    9. ANNUALISED RETURNS
    10. CONTINUOUSLY COMPOUNDED RETURNS
    11. GROSS- AND NET-OF-FEE CALCULATIONS
    12. PORTFOLIO COMPONENT RETURNS
    13. BASE CURRENCY AND LOCAL RETURNS
  7. Chapter 3 - Benchmarks
    1. BENCHMARKS
    2. BENCHMARK STATISTICS
    3. PEER GROUPS AND UNIVERSES
    4. RANDOM PORTFOLIOS
    5. NOTIONAL FUNDS
    6. EXCESS RETURN
    7. PERFORMANCE FEES
    8. PERFORMANCE FEE STRUCTURES
  8. Chapter 4 - Risk
    1. DEFINITION OF RISK
    2. RISK MEASURES
    3. REGRESSION ANALYSIS
    4. RELATIVE RISK
    5. RETURN DISTRIBUTIONS
    6. RISK-ADJUSTED PERFORMANCE MEASURES FOR HEDGE FUNDS
    7. DRAWDOWN
    8. DOWNSIDE RISK (OR SEMI-STANDARD DEVIATION)
    9. VALUE AT RISK (VaR)
    10. RETURN ADJUSTED FOR DOWNSIDE RISK
    11. FIXED INCOME RISK
    12. WHICH RISK MEASURES TO USE?
    13. RISK CONTROL STRUCTURE
  9. Chapter 5 - Performance Attribution
    1. ARITHMETIC ATTRIBUTION
    2. BRINSON AND FACHLER
    3. INTERACTION
    4. GEOMETRIC EXCESS RETURN ATTRIBUTION
    5. SECTOR WEIGHTS
  10. Chapter 6 - Multi-currency Attribution
    1. ANKRIM AND HENSEL
    2. KARNOSKY AND SINGER
    3. GEOMETRIC MULTI-CURRENCY ATTRIBUTION
    4. INTEREST RATE DIFFERENTIALS
  11. Chapter 7 - Fixed Income Attribution
    1. THE YIELD CURVE
  12. Chapter 8 - Multi-period Attribution
    1. SMOOTHING ALGORITHMS
  13. Chapter 9 - Further Attribution Issues
    1. ATTRIBUTION VARIATIONS
    2. MULTI-LEVEL ATTRIBUTION
    3. ATTRIBUTION STANDARDS
    4. EVOLUTION OF PERFORMANCE ATTRIBUTION METHODOLOGIES
    5. RISK-ADJUSTED ATTRIBUTION
  14. Chapter 10 - Performance Measurement for Derivatives
    1. FUTURES
    2. FORWARD FOREIGN EXCHANGE (FFX) CONTRACT (OR CURRENCY FORWARD)
    3. SWAPS
    4. OPTIONS
    5. WARRANTS
    6. MARKET NEUTRAL ATTRIBUTION
  15. Chapter 11 - Performance Presentation Standards
    1. WHY DO WE NEED PERFORMANCE PRESENTATION STANDARDS?
    2. GLOBAL INVESTMENT PERFORMANCE STANDARDS (GIPS)
    3. ADVANTAGES FOR ASSET MANAGERS
    4. THE STANDARDS
    5. VERIFICATION
    6. INTERPRETATIONS SUBCOMMITTEE
    7. MEASURES OF DISPERSION
    8. ACHIEVING COMPLIANCE
    9. MAINTAINING COMPLIANCE
  16. Appendix A - Simple Attribution
  17. Appendix B - Multi-currency Attribution Methodology
  18. Appendix C - EIPC Guidance for Users of Attribution Analysis
  19. Appendix D - European Investment Performance Committee – Guidance on ...
  20. Appendix E - The Global Investment Performance Standards
  21. Appendix F - Guidance Statement on Composite Definition
  22. Appendix G - Sample Global Investment Performance Standards Presentation
  23. Appendix H - Calculation Methodology Guidance Statement
  24. Appendix I - Definition of Firm Guidance Statement
  25. Appendix J - Treatment of Carve-outs Guidance Statement
  26. Appendix K - Significant Cash Flow Guidance Statement
  27. Appendix L - Guidance Statement on Performance Record Portability
  28. Appendix M - Guidance Statement on the Use of Supplemental Information
  29. Appendix N - Guidance Statement on Recordkeeping Requirements of the GIPS Standards
  30. Appendix O - Useful Websites
  31. Bibliography
  32. Index