Practical Risk-Adjusted Performance Measurement

Explore different measures of ex-post risk-adjusted performance measurement and learn to choose the correct one
 
In the newly revised Second Edition of Practical Risk-Adjusted Performance Measurement, accomplished risk and investment expert Carl R. Bacon delivers an insightful, accessible, and real-world guide to ex-post risk measurement. The author bridges the gap between theory and practice, showing you how to apply the former to the latter without introducing unnecessary mathematical complexity.
 
The book describes the fundamentals of risk in the asset management context and the descriptive statistics used to describe it. It builds on that foundation with detailed examinations of concepts like regression, drawdown, and partial moments, before moving on to topics like fixed income risk and Prospect Theory.
 
With helpful additions that include recently developed measures of risk, supplementary explanatory sections, and six brand-new chapters, this book also offers:
* A practical classification of all ex-post risk measures and how they connect to one another
* An explanation of how risk-adjusted performance measures impact performance fees
* A discussion of risk measure dashboard designs
* Instructions on how appraisal measures should be used for manager selection
 
Perfect for portfolio managers, asset owners, risk controllers, and investment performance analysts, Practical Risk-Adjusted Performance Measurement is an indispensable resource for anyone looking for a hands-on exploration of the buy-side, asset management perspective.

Inhaltsverzeichnis

Chapter 1 Introduction 15
 
Definition of risk 15
 
Risk types 15
 
Risk management v Risk control 18
 
Risk aversion 19
 
Ex-post and ex-ante 19
 
Dispersion 20
 
Chapter 2 Descriptive statistics 21
 
Mean (or arithmetic mean) 21
 
Annualised return 22
 
Continuously compounded returns (or log returns) 22
 
Winsorised mean 23
 
Mean absolute deviation (or mean deviation) 24
 
Variance 25
 
Mean difference (absolute mean difference or Gini mean difference) 30
 
Relative mean difference 31
 
Bessel's correction (population or sample, n or n-1) 31
 
Sample variance 35
 
Standard deviation (variability or volatility) 36
 
Annualised risk (or time aggregation) 37
 
The Central Limit Theorem 38
 
Frequency and number of data points 38
 
Alternative risk annualisation methods 39
 
Normal (or Gaussian) distribution 40
 
Histograms 42
 
Skewness (Fisher's or moment skewness) 43
 
Sample skewness 44
 
Kurtosis (Pearson's kurtosis) 45
 
Excess kurtosis (or Fisher's kurtosis) 47
 
Sample kurtosis 47
 
Bera-Jarque statistic (or Jarque-Bera) 48
 
Covariance 53
 
Sample covariance 54
 
Correlation (rho) 54
 
Sample correlation 55
 
Autocovariance 55
 
Autocorrelation (or serial correlation) 57
 
Annualised variability if returns are autocorrelated 60
 
Chapter 3 APPRAISAL MEASURES 62
 
Performance appraisal 62
 
Sharpe ratio (reward to variability, Sharpe index) 63
 
Roy ratio 65
 
Risk-free rate 66
 
Alternative Sharpe ratio 66
 
Revised Sharpe ratio 67
 
Adjusted Sharpe Ratio 68
 
Skew-adjusted Sharpe Ratio 69
 
Skewness-Kurtosis ratio 74
 
Alternative adjusted Sharpe Ratios 74
 
Smoothing-adjusted Sharpe Ratio 75
 
MAD ratio 76
 
Gini ratio 76
 
Relative risk 77
 
Tracking error (or tracking risk, relative risk, active risk) 77
 
Relative skewness 78
 
Relative kurtosis 79
 
Information ratio 79
 
Geometric information ratio 80
 
Modified information ratio 87
 
Adjusted information ratio 88
 
Skew-adjusted information ratio 88
 
Chapter 4: Regression Analysis 94
 
Regression analysis 94
 
Regression equation 95
 
Regression alpha 95
 
Regression beta 95
 
Regression epsilon 95
 
Capital Asset Pricing Model (CAPM) 96
 
Beta (beta) (systematic risk or volatility) 97
 
Jensen's alpha (Jensen's measure or Jensen's differential return or ex-post alpha) 97
 
Annualised alpha 98
 
Bull beta (beta¯+) 106
 
Bear beta (beta-) 106
 
Beta timing ratio 106
 
Market timing 107
 
Systematic risk 115
 
Correlation 115
 
R2(or coefficient of determination) 116
 
Specific (or residual) risk 117
 
The Geometry of Risk 120
 
Treynor ratio (Reward to volatility) 124
 
Modified Treynor ratio 124
 
Appraisal ratio (or Treynor-Black ratio) 125
 
Modified Jensen 126
 
Fama decomposition 126
 
Selectivity 127
 
Diversification 127
 
Net selectivity 127
 
Fama-French three factor model 128
 
Three factor alpha (or Fama-French alpha) 129
 
Carhart four factor model 129
 
Four factor alpha (or Carhart's alpha) 130
 
Types of Alpha 130
 
Multi-factor Models 131

Über den Autor / die Autorin

CARL R. BACON, CIPM, is Chief Advisor to Confluence. He is a member of the Advisory Board of the Journal of Performance Measurement and Founder of The Freedom Index Company. He was formerly Chairman of StatPro Plc from 2000 to 2017.

Zusammenfassung

Explore different measures of ex-post risk-adjusted performance measurement and learn to choose the correct one

In the newly revised Second Edition of Practical Risk-Adjusted Performance Measurement, accomplished risk and investment expert Carl R. Bacon delivers an insightful, accessible, and real-world guide to ex-post risk measurement. The author bridges the gap between theory and practice, showing you how to apply the former to the latter without introducing unnecessary mathematical complexity.

The book describes the fundamentals of risk in the asset management context and the descriptive statistics used to describe it. It builds on that foundation with detailed examinations of concepts like regression, drawdown, and partial moments, before moving on to topics like fixed income risk and Prospect Theory.

With helpful additions that include recently developed measures of risk, supplementary explanatory sections, and six brand-new chapters, this book also offers:
* A practical classification of all ex-post risk measures and how they connect to one another
* An explanation of how risk-adjusted performance measures impact performance fees
* A discussion of risk measure dashboard designs
* Instructions on how appraisal measures should be used for manager selection

Perfect for portfolio managers, asset owners, risk controllers, and investment performance analysts, Practical Risk-Adjusted Performance Measurement is an indispensable resource for anyone looking for a hands-on exploration of the buy-side, asset management perspective.

Produktdetails

• Autoren: Carl R Bacon, Carl R. Bacon, Carl R. (Confluence) Bacon, Cr Bacon, Bacon Carl R.
• Verlag: Wiley, John and Sons Ltd
• Sprache: Englisch
• Produktform: Fester Einband
• Erschienen: 30.11.2021
• EAN: 9781119838845
• ISBN: 978-1-119-83884-5
• Seiten: 320
• Serien: Wiley Finance; The Wiley Finance Series
• Themen: Sozialwissenschaften, Recht,Wirtschaft > Wirtschaft > Betriebswirtschaft; Allg. Finanz- u. Anlagewesen, Finance & Investments, Finanz- u. Anlagewesen, Institutionelle Finanzplanung, Geld u. Bankwesen, Money & Banking, Spezialthemen Finanz- u. Anlagewesen, Finance & Investments Special Topics