Portfolio performance evaluation

George Aragon, Wayne E. Ferson

Research output: Contribution to journalArticle

39 Citations (Scopus)

Abstract

This paper provides a review of the methods for measuring portfolio performance and the evidence on the performance of professionally managed investment portfolios. Traditional performance measures, strongly influenced by the Capital Asset Pricing Model of Sharpe (1964), were developed prior to 1990. We discuss some of the properties and important problems associated with these measures. We then review the more recent Conditional Performance Evaluation techniques, designed to allow for expected returns and risks that may vary over time, and thus addressing one major shortcoming of the traditional measures. We also discuss weight-based performance measures and the stochastic discount factor approach. We review the evidence that these newer measures have produced on selectivity and market timing ability for professional managed investment funds. The evidence includes equity style mutual funds, pension funds, asset allocation style funds, fixed income funds and hedge funds.

Original languageEnglish (US)
Pages (from-to)83-190
Number of pages108
JournalFoundations and Trends in Finance
Volume2
Issue number2
DOIs
StatePublished - 2006

Fingerprint

Performance evaluation
Portfolio performance
Performance measures
Investment portfolio
Hedge funds
Selectivity
Stochastic discount factor
Mutual funds
Market timing
Capital asset pricing model
Pension funds
Asset allocation
Expected returns
Investment funds
Equity
Fixed income

Keywords

  • Hedge funds
  • Managed portfolios
  • Mutual fund performance
  • Portfolio performance

ASJC Scopus subject areas

  • Economics and Econometrics
  • Finance

Cite this

Portfolio performance evaluation. / Aragon, George; Ferson, Wayne E.

In: Foundations and Trends in Finance, Vol. 2, No. 2, 2006, p. 83-190.

Research output: Contribution to journalArticle

Aragon, George ; Ferson, Wayne E. / Portfolio performance evaluation. In: Foundations and Trends in Finance. 2006 ; Vol. 2, No. 2. pp. 83-190.
@article{42146f27ab8a41ed87ac7a229188fba1,
title = "Portfolio performance evaluation",
abstract = "This paper provides a review of the methods for measuring portfolio performance and the evidence on the performance of professionally managed investment portfolios. Traditional performance measures, strongly influenced by the Capital Asset Pricing Model of Sharpe (1964), were developed prior to 1990. We discuss some of the properties and important problems associated with these measures. We then review the more recent Conditional Performance Evaluation techniques, designed to allow for expected returns and risks that may vary over time, and thus addressing one major shortcoming of the traditional measures. We also discuss weight-based performance measures and the stochastic discount factor approach. We review the evidence that these newer measures have produced on selectivity and market timing ability for professional managed investment funds. The evidence includes equity style mutual funds, pension funds, asset allocation style funds, fixed income funds and hedge funds.",
keywords = "Hedge funds, Managed portfolios, Mutual fund performance, Portfolio performance",
author = "George Aragon and Ferson, {Wayne E.}",
year = "2006",
doi = "10.1561/0500000015",
language = "English (US)",
volume = "2",
pages = "83--190",
journal = "Foundations and Trends in Finance",
issn = "1567-2395",
publisher = "Now Publishers Inc",
number = "2",

}

TY - JOUR

T1 - Portfolio performance evaluation

AU - Aragon, George

AU - Ferson, Wayne E.

PY - 2006

Y1 - 2006

N2 - This paper provides a review of the methods for measuring portfolio performance and the evidence on the performance of professionally managed investment portfolios. Traditional performance measures, strongly influenced by the Capital Asset Pricing Model of Sharpe (1964), were developed prior to 1990. We discuss some of the properties and important problems associated with these measures. We then review the more recent Conditional Performance Evaluation techniques, designed to allow for expected returns and risks that may vary over time, and thus addressing one major shortcoming of the traditional measures. We also discuss weight-based performance measures and the stochastic discount factor approach. We review the evidence that these newer measures have produced on selectivity and market timing ability for professional managed investment funds. The evidence includes equity style mutual funds, pension funds, asset allocation style funds, fixed income funds and hedge funds.

AB - This paper provides a review of the methods for measuring portfolio performance and the evidence on the performance of professionally managed investment portfolios. Traditional performance measures, strongly influenced by the Capital Asset Pricing Model of Sharpe (1964), were developed prior to 1990. We discuss some of the properties and important problems associated with these measures. We then review the more recent Conditional Performance Evaluation techniques, designed to allow for expected returns and risks that may vary over time, and thus addressing one major shortcoming of the traditional measures. We also discuss weight-based performance measures and the stochastic discount factor approach. We review the evidence that these newer measures have produced on selectivity and market timing ability for professional managed investment funds. The evidence includes equity style mutual funds, pension funds, asset allocation style funds, fixed income funds and hedge funds.

KW - Hedge funds

KW - Managed portfolios

KW - Mutual fund performance

KW - Portfolio performance

UR - http://www.scopus.com/inward/record.url?scp=79952593669&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=79952593669&partnerID=8YFLogxK

U2 - 10.1561/0500000015

DO - 10.1561/0500000015

M3 - Article

AN - SCOPUS:79952593669

VL - 2

SP - 83

EP - 190

JO - Foundations and Trends in Finance

JF - Foundations and Trends in Finance

SN - 1567-2395

IS - 2

ER -