portfolio analysis advanced topics in performance measurement risk and attribution pdf

Portfolio Analysis Advanced Topics In Performance Measurement Risk And Attribution Pdf

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Investment and Portfolio Management Specialization

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To learn more, view our Privacy Policy. Log In Sign Up. Download Free PDF. Portfolio Theory and Performance Analysis. Syrym Mussagaliyev. Download PDF. A short summary of this paper. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except under the terms of the Copyright, Designs and Patents Act or under the terms of a licence issued by the Copyright Licensing Agency Ltd, 90 Tottenham Court Road, London W1T 4LP, UK, without the permission in writing of the Publisher.

This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold on the understanding that the Publisher is not engaged in rendering professional services. If professional advice or other expert assistance is required, the services of a competent professional should be sought. Some content that appears in print may not be available in electronic books. Peer groups 49 2. A new approach: Portfolio Opportunity Distributions 50 2.

Finally, we address our thanks to Ms Laurence Kriloff for her patience and expertise in assisting us with the formatting of the electronic version of this manuscript. All errors and omissions remain, naturally, our own responsibility. He is the author of numerous publications in the domain of portfolio management, notably in the areas of asset allocation and performance measurement.

Introduction Over the past 20 years, portfolio management has evolved enormously. In terms of production, the development of multi-management has given these new strate- gies a concrete identity. As a result, multi-distribution and multi-management are based on and affect a considerable amount of research in the area of fund performance analysis.

Since multi-managers and multi- distributors are anxious to delegate their management in the best possible conditions, and sell the value-added constituted by manager selection to their clients, they undertake numerous initiatives and engage in extensive research to improve portfolio and fund performance analysis and measurement. Since the beginning of the s, this concept has revolutionised institutional management in North America.

Finally, as in any competitive environment, marketing practices are essential. That is the principal objective of this publication: to allow the professionals, whether managers or investors, to take a step back and clearly separate the true innovations from mere improvements to well-known, existing techniques; to situate the importance of innovations with regard to the fundamental portfolio management questions, which are the evolution of the investment management process, risk analysis and performance measurement; and to take the explicit or implicit assumptions contained in the promoted tools into account and, by so doing, evaluate the inherent interpretative or practical limits.

With that perspective in mind, the layout of this book connects each of the major categories of techniques and practices to the unifying and seminal conceptual developments of modern portfolio theory, whether these involve measuring the return on a portfolio, analysing portfolio risk or evaluating the quality of the portfolio management process. It is commonplace to group them together into major categories. Each asset class corre- sponds to a level of risk. The assets in each group can then be split, at a more detailed level, into sub-groups.

Bonds are grouped together according to criteria such as maturity or the quality of the issuer. The aim is to obtain groups of assets that behave in a similar way and are characterised by an exposure to risk factors cf.

Chapter 6. Placing portfolio assets in categories is part of a top-down approach to portfolio analysis, which establishes a discriminating link between the choice of an asset class and the return on the portfolio.

Each class can then be subdivided into groups with common criteria. The class of derivative instruments can be added to these asset classes. The amount is therefore liable to vary from one year to the next. Equities constitute the most risky class of assets, but, as compensation, they provide a greater 1 For more details on the subjects discussed in this chapter, we recommend Chapter 1 of Fabozzi and Boulier They can be issued by a company or by a State.

These securities give rise to regular payment of coupons, which constitute the interest on the loan, and redemption of the security at maturity. Bonds represent an investment that is less risky than equities, but also less lucrative over the long term.

Their risk is analysed in two ways: 1. The risk of non-redemption or credit risk, evaluated according to the quality of the issuer, which is measured by a rating system. The market risk, or interest rate risk, which is analysed as a function of the opportunity cost represented by the difference between the return ensured by the bond and that of the market for an equivalent maturity.

Bonds are grouped, consequently, into issuers or ratings and maturities. It involves short-term borrowing and lending for managing the cash in a portfolio. These asset classes, which have different levels of risk, allow investors to spread their in- vestments, according to the planned duration of the investment and the risk that the investor is willing to take.

Investors can thus predict the average return on their investment. Intuitively, it seems clear that this will allow the risk taken to be limited. It is made up of a large variety of assets, among which we can cite options, futures, forwards and swaps. The purchase, or sale, is carried out at the date the contract expires, for a European option, or at that date at the latest, for an American option.

The underlying instruments can be equities, indices, currencies, futures or interest rates. A forward contract allows the same transaction to be carried out, but unlike futures, which are traded on an organised market, forward contracts are traded over the counter.

These assets are said to be derivative because their price depends on an underlying in- strument. They play an important role in portfolio management. They also allow portfolio risk to be hedged and performance to be improved by using a leverage effect on the return.

Among the different assets considered, hedge funds have experienced considerable growth. At the end of , they accounted for more than billion dollars in managed assets. The success of alternative funds, notably hedge funds, is linked to two considerations: 1. On this second point, numerous studies have highlighted the advantages of including an alternative class in the overall asset allocation.

Beeman et al. In spite of these undeniable advantages, we will not deal with the subject of performance analysis for alternative assets in the present publication. In view of the diversity of alternative investment vehicles and their characteristics, we feel that it would be necessary to adapt the risk and performance analysis models proposed by portfolio theory. Such an adaptation would assume a more thorough analysis of factorial approaches and would notably take into account the non-linearity of returns.

The assets can also be grouped according to the size of their market capitalisation, or whether they present value or growth characteristics. We then refer to the style of the stocks.

This grouping of assets into homogeneous categories corresponds to a trend towards greater specialisation among managers. Many funds are invested in a single asset category. In order to offer managers a reference to evaluate their management, all the major market indices are now organised into ranges of sectors. Worldwide indices are now beginning to do the same. The Dow Jones group has just launched global sector indices for the major sectors of activity. We will return to this point in the third section of this chapter.

Quantitative investment techniques are now among the most widely used fund management methods. A general idea of the major trends in investment management is given below.

It is therefore pointless to try to beat the market. The best technique in that case is to try to replicate a market index, i. This type of investment is a direct result of equilibrium theory and the capital asset pricing model, which we will discuss in Chapter 4.

It has led to the creation of index funds, i. These funds have the lowest management fees. In addition, since the composition of indices is relatively stable, the turnover rate in the portfolios is relatively low, which limits transaction costs. These funds use a technique derived from that of classic index funds. The idea is to introduce an element of active investment, to try to obtain a performance that is better than that of the reference index, without exposing the portfolio to a market risk greater than that of the index.

The difference in performance compared with the reference portfolio, measured by the tracking- error, is followed with precision and must remain within a relatively strict band. Management is based on analysis of the systematic portfolio risk, i. The risk is broken down with the help of multi-factor models.

These models allow the different sources of risk to be analysed and the portfolio oriented towards the most lucrative risk factors, which allows the tilt sought to be obtained. Multi-factor models are discussed in Chapter 6. In certain cases a portfolio composition constraint is imposed by reducing the stock picking to a simple over- or underweighting of the stocks that make up the reference index. The methods are portfolio insurance and, more generally, methods that are called structured investment methods.

In its simplest version, portfolio insurance consists of automatically readjusting the com- position of the portfolio between money market instruments and risky instruments, depending on how the market evolves, in such a way that it never falls below a certain level of return see Black and Jones, , and Perold and Sharpe, In a more general way, allocation can be carried out between two asset classes, with one being riskier than the other, such as equities and bonds, for example.

The forecasts that allow decisions to be taken are based on observation of economic or stock exchange cycles. The principle of portfolio insurance leads to buying the risky asset when it has progressed and selling it when it has depreciated.

This approach consists of periodical readjustment of the proportions, but is not performed automatically. Portfolio insurance can also be carried out with the help of options. This principle is used in funds with guaranteed capital and allows the investor to be sure to recover the amount invested, at the very least, when the investment period expires.

This is the cost of the insurance. For more details on this type of portfolio management and the methods used, see Chapter 5 of Amenc and Le Sourd

Risk management providers

The world of portfolio management has expanded greatly over the past three decades, and along with it, so have the theoretical tools necessary to appropriately service the needs of both private wealth and institutional clients. While the foundations of modern finance emerged during the s and asset pricing models were developed in a portfolio context in the s, portfolio management has now expanded into more complex models. Further, the traditional assumption of rational investor behavior with decisions made on the basis of statistical distributions has expanded to consider behavioral at Further, the traditional assumption of rational investor behavior with decisions made on the basis of statistical distributions has expanded to consider behavioral attributes of clients as well as goals-based strategies. Performance assessment has taken on greater importance since the s.

Performance Attribution Pdf

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Performance Attribution Pdf. Is it possible to define the measurement points within the analysis model that are relevant to the investment process? Do the models cover the desired range of instruments.

Reconciling Brinson with Markowitz and making sense of the debate about the relative importance of allocation and selection Evaluating pure selection decisions Conditional attribution effects The seminar will be held in an attractive destination in the very heart of Europe. The seminar will also be held globally online on the same days as the in-class event. Lecturer Andreas Steiner.

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Portfolio Analysis: Advanced topics in performance measurement, risk and attribution Risk Books, It includes chapters from practitioners and industry authors who investigate topics under the wide umbrella of performance measurement , attribution and risk management , drawing on their own experience of the fields. The book also boasts a first in its area in that it brings together previously separated topics and practitioners or ex-post performance measurement and ex-ante performance risk measurement. It is also the first book to explain the role of the Transition Manager. The book includes coverage and discussion of performance measurement, performance evaluation, portfolio risk, performance attribution, Value-at-Risk VaR , managing tracking error and GIPS verification.

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Попробуем порыскать. ГЛАВА 125 - Сколько у нас времени? - крикнул Джабба. Техники в задней части комнаты не откликнулись. Все их внимание было приковано к ВР.

2 comments

Fealty G.

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Barry O.

Performance attribution, or investment performance attribution is a set of techniques that performance analysts use to explain why a portfolio 's performance differed from the benchmark.

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