Portfolio Management - Performance Measurement

Portfolio Management - Performance Measurement - Portfolio...

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1 Portfolio Management – Performance Measurement Copyright © 1996 – 2006 Investment Analytics
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Copyright © 1996-2006 Investment Analytics Performance Measurement Slide: 2 Overview ± Measuring Profitability ± Equity Curve Measures ± Portfolio Performance Measures
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Copyright © 1996-2006 Investment Analytics Performance Measurement Slide: 3 Measuring Profitability ± Net returns ± Buy and hold test ± Distance from the ideal
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Copyright © 1996-2006 Investment Analytics Performance Measurement Slide: 4 Net Returns ± Test of investment strategy ± Long positions when expected returns are positive ± Short positions when expected returns are negative = < > = = + + + + = 0 ) ( 0 0 ) ( 1 0 ) ( 1 ) ( 1 1 1 1 1 t t t t t t t t t n t t y f if y f if y f if p y y p r
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Copyright © 1996-2006 Investment Analytics Performance Measurement Slide: 5 Buy and Hold Test ± Benchmark to quantify excess returns ± Tests whether profitability is due to predictive ability or just general market conditions ± C is stock dividend or bond coupon t t n t y y y c r ) ( + = +
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Copyright © 1996-2006 Investment Analytics Performance Measurement Slide: 6 Distance From the Ideal ± Measures returns from trading system against perfect predictor d ± P t as previously defined = + = + = n t t t n t t t t d y y y y p r 1 1 1 1 | | ) (
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Copyright © 1996-2006 Investment Analytics Performance Measurement Slide: 7 Equity Curve Measures ± Drawdown ± Luck coefficient ± Stirling ratio ± Risk of ruin
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Portfolio Management - Performance Measurement - Portfolio...

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