performance

Not fooled by randomness

September 10, 2012 | 0 Comments

The paper is “Not Fooled by Randomness: Using Random Portfolios to Analyze Investment Funds” by Roberto Stein.  Here is an explanation of the idea of random portfolios. Favorite sentence The real question here is whether we’re actually measuring skill, or these are still measures of performance, so influenced by ... [Read more...]

Jackknifing portfolio decision returns

May 28, 2012 | 0 Comments

A look at return variability for portfolio changes. The problem Suppose we make some change to our portfolio.  At a later date we can see if that change was good or bad for the portfolio return.  Say, for instance, that it helped by 16 basis points.  How do we properly account ... [Read more...]

Performance measurement is about decisions

November 16, 2011 | 0 Comments

The return of a hypothetical fund was 17.9% in 2010.  We want to know if that is good or bad. The benchmark method The assets in the portfolio are constituents of the S&P 500, so we can compare our fund return to the return of the index. Figure 1: 2010 returns of: the fund ... [Read more...]

Performance ratios, bootstrapping and infinite variances

June 18, 2011 | 0 Comments

If returns had infinite variance, would there be a problem bootstrapping information ratios? Background There is a discussion on the Quant Finance group of LinkedIn with the title: “How do you measure the confidence intervals of performance ratios?” One suggestion was to use the statistical bootstrap. This resulted in a ... [Read more...]

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