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Chapter 13 - Learning Objectives To get a high evaluation...

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Learning Objectives To get a high evaluation of your investments’ performance, make sure you know: 1. How to calculate the three best-known portfolio evaluation measures. 2. The strengths and weaknesses of these three portfolio evaluation measures. 3. How to calculate a Sharpe-optimal portfolio. 13-1
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13-2 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
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13-3 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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13-4 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 benchmark, or standard.
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