PM 3: Measuring portfolio performance

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Created by: charlie
Created on: 20-05-18 15:42

Returns (no cash injections/ withdrawals)

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Money-weighted returns (with cash injections/ withdrawals)

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Time-weighted returns (with cash injections/ withdrawals)

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Mean return: Arithmetic returns (when returns independent)

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Mean return: Geometric returns (when returns aren't independent)

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Market index: Equal weighting

Each stock assigned same weight (rare)

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Market index: Price weighting

Avg of stock prices

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Market index: Market cap (value) weighting

avg of stock prices x number of shares (common)

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Theoretical Market portfolio: Roll's Critique on CAPM

1) market portfolio is unobservable (can only use an imperfect market proxy which doesn't include non-traded assets/ human capital) 2) there may not always be tangency portfolio (mean-variance efficient)

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Variance/ SD (tutorial 3)

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Covariance (tutorial 3)

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CML (total risk) or SML (systematic risk)

CML: when portfolio is ones only asset holding (>90% wealth/ not WDP/ lots of idiosyncratic risk)/ SML: when portfolio represents one of many different asset holdings (

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Performance measurement: Sharpe (equation/ definition)

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Performance measurement: Sharpe (+ves/ -ves)

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Performance measurement: M (equation + definition)

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Performance measurement: M (+ves/ -ves)

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Performance measurement: Treynor (equation + definition)

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Performance measurement: Treynor (+ves/ -ves)

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Performance measurement: Jenson's alpha (equation + definition)

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Comparing Sharpe + M (linearly related)

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Other cards in this set

Card 2

Front

Money-weighted returns (with cash injections/ withdrawals)

Back

Card 3

Front

Time-weighted returns (with cash injections/ withdrawals)

Back

Card 4

Front

Mean return: Arithmetic returns (when returns independent)

Back

Card 5

Front

Mean return: Geometric returns (when returns aren't independent)

Back

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PM 3: Measuring portfolio performance