Level 62 Level 64
Level 63

Risk Adjusted Performance Appraisal

11 words 0 ignored

Ready to learn       Ready to review

Ignore words

Check the boxes below to ignore/unignore words, then click save at the bottom. Ignored words will never appear in any learning session.

All None

Ex Post Alpha (Jensen's alpha)
Uses SML (CAPM) to determine benchmark, ex post. Relates excess return to systematic risk
Treynor Measure
Related to ex-post alpha, relates excess return to systematic risk. Also uses ex-post SML as benchmark, = Ra-Rf/Ba
Sharpe Ratio
Slope of the capital market line
Based on CML. Measures what the account would have returned if it took on the same risk as the market index.
information ratio
(Rp - Rb) / s(Rp-Rb)
Type 1 error
Keeping manager with no value-add.
Type 2 error
Firing a manager that does add value.
Performance Evaluation 3 Steps:
1 - performance measurement 2 - performance attribution 3 - performance appraisal
MWR sensitive to CFs, TWR is not
MWR vs TMR - timing and size of CF
Linked IRR
Calculate MWR over reasonable frequent time periods and chain link - results in approx of TMR
Roll's critique
When using risk adj return ratios based on CAPM: