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Performance attribution, or investment performance attribution is a set of techniques that performance analysts use to explain why a portfolio's performance differed from the benchmark. This difference between the portfolio return and the benchmark return is known as the active return .
The ex-post Sharpe ratio uses the same equation as the one above but with realized returns of the asset and benchmark rather than expected returns; see the second example below. The information ratio is a generalization of the Sharpe ratio that uses as benchmark some other, typically risky index rather than using risk-free returns.
The information ratio is similar to the Sharpe ratio, the main difference being that the Sharpe ratio uses a risk-free return as benchmark (such as a U.S. Treasury security) whereas the information ratio uses a risky index as benchmark (such as the S&P500). The Sharpe ratio is useful for an attribution of the absolute returns of a portfolio ...
The absolute return or simply return is a measure of the gain or loss on an investment portfolio expressed as a percentage of invested capital. The adjective "absolute" is used to stress the distinction with the relative return measures (often used by long-only stock funds) that are based on comparison to a benchmark.
Negative cashflows are treated as contributions. On the first period, a $100 call in the fund is matched by a $100 investment into the index. On the second period, the $100 index investment is now worth $105, to which is added $50 of new investment. A positive cashflow is treated by decreasing the index investment by the same value.
The iBoxx bond market indices are transparent, rules-based fixed income indices that are primarily used by passive and active professional investors as well as investment banks. iBoxx offers broad benchmarks used to evaluate investment performance and to conduct research, as well as liquid indices used as an underlying for tradable products ...
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