Chap13 - Chapter 13 Performance Evaluation and Risk...

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1 Chapter 13 Performance Evaluation and  Risk Management
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2 Performance Evaluation and Risk  Management Our goals in this chapter are to learn methods of Evaluating risk-adjusted investment performance, and Assessing and managing the risks involved with specific investment strategies How well did our investments do?
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3 Performance Evaluation Can anyone consistently earn an “excess” return, thereby “beating” the market? Performance evaluation is a term for assessing how well a money manager achieves a balance between high returns and acceptable risks.
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4 Chapter Outline Performance Evaluation Performance Evaluation Measures The Sharpe Ratio The Treynor Ratio Jensen’s Alpha
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Performance Evaluation Measures The raw return on a portfolio, R P , is simply the total percentage return on a portfolio. The raw return is a naive performance evaluation measure because: The raw return has no adjustment for risk. The raw return is not compared to any
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Chap13 - Chapter 13 Performance Evaluation and Risk...

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