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Modigliani risk-adjusted performance (also known as M 2, M2, Modigliani–Modigliani measure or RAP) is a measure of the risk-adjusted returns of some investment portfolio. It measures the returns of the portfolio, adjusted for the risk of the portfolio relative to that of some benchmark (e.g., the market).
The portfolio performance was 4.60%, compared with a benchmark return of 2.40%. Thus the portfolio outperformed the benchmark by 220 basis points.The task of performance attribution is to explain the decisions that the portfolio manager took to generate this 220 basis points of value added.
The V2 ratio (V2R) is a measure of excess return per unit of exposure to loss of an investment asset, portfolio or strategy, compared to a given benchmark.. The goal of the V2 ratio is to improve on existing and popular measures of risk-adjusted return, such as the Sharpe ratio, information ratio or Sterling ratio by taking into account the psychological impact of investment performances.
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Brinson and Fachler (1985) and Brinson, Hood, and Beebower (1986) introduced the Brinson models as a foundation for investment portfolio performance attribution. [6] These models further sub-divide active returns due to active management into security selection - return achieved through selecting different securities than the benchmark, asset allocation - return achieved through weighting ...
Relative return is a measure of the return or profit of an investment portfolio relative to a theoretical passive reference portfolio or benchmark. [1] In active portfolio management, the aim is to maximize the relative return (often subject to a risk constraint).