Recently added articles from Foundations and Trends in Finance:

Portfolio performance evaluation.(Brief article)

Apr 01, 2006; Aragon, George O. ... Abstract This paper provides a review of the methods for measuring portfolio performance and the evidence on the performance of professionally managed investment portfolios. Traditional performance measures, strongly influenced by the Capital Asset Pricing Model of Sharpe ...

1 Introduction.(Portfolio Performance Evaluation)

Apr 01, 2006; Aragon, George O. ... This is a good time for a review of the academic literature on evaluating portfolio performance, concentrating on professionally managed investment portfolios. While the literature goes back to before the 1960s, recent years have witnessed an explosion of new methods for performance ...

2 Classical measures of portfolio performance.(Portfolio Performance Evaluation)

Apr 01, 2006; Aragon, George O. ... This chapter provides an overview of the classical measures of risk-adjusted portfolio performance. We first describe the general logic that lies behind all of the measures, and then define the individual measures. We then discuss the theoretical properties of the measures in more detail ....

3 Conditional performance evaluation.(Portfolio Performance Evaluation)

Apr 01, 2006; Aragon, George O. ... Traditional measures of risk-adjusted performance for mutual funds compare the average return of a fund with an OE benchmark designed to control for the fund's average risk. For example, Jensen's (1968) alpha is the difference between the return of a fund and a portfolio constructed from a ...

4 The stochastic discount factor approach.(Portfolio Performance Evaluation)

Apr 01, 2006; Aragon, George O. ... Modern asset pricing theory posits the existence of a stochastic discount factor, [m.sub.t+1], which is a scalar random variable, such that the following equation holds: E([m.sub.t+1]pR.sub.t+1] - [1.bar]| [Z.sub.t]) = 0, (4.1) where [R.sub.t+1] is the vector of ...

5 Implementing the measures: a fund-of-funds perspective.(Portfolio Performance Evaluation)

Apr 01, 2006; Aragon, George O. ... This chapter provides a hypothetical application of the techniques used to evaluate a given set of portfolios. The main goal is to illustrate the required steps for avoiding the pitfalls associated with data biases, performing the statistical tests, and interpreting the results. The ...

6 Bond fund performance measurement.(Portfolio Performance Evaluation)

Apr 01, 2006; Aragon, George O. ... 6.1 Fixed Income Models Elton et al. (1993; 1995) were the seminal academic studies of the performance of bond style mutual funds. They used versions of the classical multibeta model alphas described above, where the factors are selected to address the risks most likely to be ...

7 Hedge fund performance.(Portfolio Performance Evaluation)

Apr 01, 2006; Aragon, George O. ... Hedge funds have been in business for over 60 years. However, the recent growth in hedge fund assets and the significant attention devoted to hedge funds in the popular press has increased the interest in hedge fund performance. Like mutual funds, hedge funds are open-ended investment ...

8 Recent empirical evidence.(Portfolio Performance Evaluation)

Apr 01, 2006; Aragon, George O. ... 8.1 Evidence on Conditional Alphas Ferson and Schadt (1996) find evidence that funds' risk exposures change significantly in response to variables that represent public information on the economy, such as the levels of interest rates and dividend yields. Using conditional models ...

9 A summary: the evidence on managed portfolio performance and market efficiency.(Portfolio Performance Evaluation)

Apr 01, 2006; Aragon, George O. ... The evidence on the performance of professionally managed portfolios relates to the classical question of the informational efficiency of the markets, as summarized by Fama (1970). This section first describes how these ideas are related and then presents some tables that summarize the ...

10 Conclusions.(Portfolio Performance Evaluation)(Brief article)

Apr 01, 2006; Aragon, George O. ... We have reviewed the models and methods for measuring portfolio performance and the evidence on the performance of professionally managed investment portfolios. Our review includes traditional measures, their properties and some of the important problems associated with the early measures ....

Acknowledgments.(Portfolio Performance Evaluation)

Apr 01, 2006; Aragon, George O. ... Ferson acknowledges financial support from the Collins Chair in Finance at Boston College and the Marshall School of Business at the ...

References.(Portfolio Performance Evaluation)

Apr 01, 2006; Aragon, George O. ... Ackermann, C., R. McEnally, and D. Ravenscraft (1999), 'The performance of hedge funds: Risk, return, and incentives'. Journal of Finance 54, 833-874. Admati, A. R., S. Bhattacharya, P. Pfleiderer, and S. A. Ross (1986), 'On timing and selectivity'. Journal of Finance 41, ...