Performance Evaluation and Attribution of Security Portfolios

Introduction to the Series

Preface

Section 1: Performance Evaluation

Chapter 1. An Introduction to Asset Pricing Models

1.1 Historical Asset Pricing Models

1.2 The Beginning of Modern Asset Pricing Models

1.3 Efficient Markets

1.4 Studies That Attack the CAPM

1.5 Does proving the CAPM wrong = Market inefficiency? Or, do efficient markets = the CAPM is correct?

1.6 Small Capitalization and Value Stocks

1.7 The Asset Pricing Models of Today

1.8 Chapter-End Problems

References

Chapter 2. Returns-Based Performance Evaluation Models

2.1 Introduction

2.2 Goals, Guidelines, and Perils of Performance Evaluation

2.3 Returns-Based Analysis

2.4 Chapter-End Problems

References

Chapter 3. Returns-Based Performance Measures

3.1 Introduction

3.2 Luck vs. Skill

3.3 The Ultimate Goal of Performance Measures

3.4 Two Non-Regression Approaches

3.5 Regression-Based Performance Measures

3.6 Chapter-End Problems

References

Chapter 4. Portfolio-Holdings Based Performance Evaluation

4.1 Introduction

4.2 Unconditional Holdings-Based Performance Measurement

4.3 Conditional Holdings-Based Performance Measurement

4.4 Chapter-End Problems

References

Chapter 5. Combining Portfolio-Holdings-Based and Returns-Based Performance Evaluation (and the “Return Gap”)

5.1 Introduction

5.2 Performance-Decomposition Methodology

5.3 Application to U.S. Domestic Equity Mutual Funds

5.4 Empirical Results for U.S. Domestic Equity Mutual Funds

5.5 Results for U.S. Domestic Corporate BOND Mutual Funds

5.6 Appendix A

5.7 Appendix B

5.8 Chapter-End Problems

References

Chapter 6. Performance Evaluation of Non-Normal Portfolios

6.1 Introduction

6.2 Bootstrap Evaluation of Fund Alphas

6.3 Data

6.4 Results for U.S. Equity Funds

6.5 Sensitivity Analysis

6.6 Performance Persistence

6.7 Chapter-End Problems

References

Chapter 7. Fund Manager Selection Using Macroeconomic Information

7.1 Introduction

7.2 A Dynamic Model of Managed Fund Returns

7.3 Empirical Example: U.S. Domestic Equity Fund Data

7.4 Empirical Example: Results for U.S. Domestic Equity Funds

7.5 Chapter-End Problems

Appendix A Description of Mutual Fund Database

Appendix B Investments when fund risk loadings and benchmark returns may be predictable

Appendix C Investments when skills may be predictable

References

Chapter 8. Multiple Fund Performance Evaluation: The False Discovery Rate Approach

8.1 Introduction

8.2 The Impact of Luck on Managed Fund Performance

8.3 An Empirical Example: U.S. Domestic Equity Mutual Funds

8.4 An Empirical Example: Results for U.S. Domestic Equity Funds

References

Chapter 9. Active Management in Mostly Efficient Markets: A Survey of the Academic Literature

9.1 Introduction

9.2 Some Caveats

9.3 Does Active Management Add Value?

9.4 Active Management and “Mostly Efficient Markets”

9.5 Identifying Superior Active Managers (‘SAM’s)

9.6 Conclusions

9.7 Chapter-End Problems

References

Section 2: Performance Analysis and Reporting

Chapter 10. Basic Performance Evaluation Models

10.1 Basis Formula for the Calculation of Returns

10.2 Geometric Linkage and Scaling of Returns

10.3 Internal Rate of Return

10.4 Time-Weighted Return

10.5 Comparison Between the Time-Weighted Return and the Internal Rate of Return

10.6 Approximation Methods for the Computation of the Time-Weighted Return

10.7 Active Return

10.8 Continuously Compounded Returns

Appendix A Equality between the Time-Weighted Return and the Internal Rate of Return

Appendix B Solving Polynomial Equations for the Determination of Internal Rate of Return

Appendix C Time-Weighted Return and the Unit Price Method

Chapter 11. Indices and the Construction of Benchmarks

11.1 Basic Concepts

11.2 Equity Indices

11.3 Bond Indices

11.4 Money Market Indices

11.5 Peer Group Comparisons and Fund Universes

11.6 Benchmarks for Portfolios Investing in Multiple Asset Classes

11.7 Chapter-End Problems

Chapter 12. Attribution Analysis for Equity Portfolios According to the Brinson Approach

12.1 Introduction to Attribution Analysis

12.2 Single-Period Attribution Analysis According to the Brinson Approach

12.3 Multi-period Attribution Analysis According to Brinson et al.

12.4 Attribution Analysis in a Geometric Form

12.5 Further Aspects of Attribution Analysis

Chapter 13. Attribution Analysis for Fixed Income Portfolios

Appendix: Duration Measures

13.5 Exercises for Chapter-End Problems

Chapter 14. Analysis of Multi-Asset Class Portfolios and Hedge Funds

14.1 Basic Considerations

14.2 Attribution Analysis on Two Levels

14.3 Attribution Analysis on Three Levels

14.4 Implementation in practice

14.5 Risk-Adjusted Attribution Analysis Based On the Systematic Risk

14.6 Risk-Adjusted Attribution Analysis Based on the Information Ratio

14.7 Special Aspects in the Analysis of Hedge Funds

14.8 Chapter-End Problems

Chapter 15. Attribution Analysis with Derivatives

15.1 Attribution Analysis with Derivative-Based Currency Management

15.2 Treatment of Futures and Forwards

15.3 Treatment of Options

15.4 Swaps

15.5 Chapter-End Problems

Chapter 16. Global Investment Performance Standards (GIPS)

16.1 Background

16.2 Definition of Firm

16.3 Creation of Composites

16.4 Determination of Composite Return

16.5 Further Disclosure Requirements for Composite Structure and Sample Presentations

16.6 Maintenance of Composites

16.7 Independent Verification of Compliance with the Standards

16.8 Measurement of the Homogeneity of the Investment Process

16.9 Presentation of Risks according to the GIPS

16.10 Chapter-End Problems

Index