Investment Performance Measurement

This timely book, Investment Performance Measurement will help investment professionals successfully analyze and manage their wealth. The CFA Institute is the largest association of professional investment mangers worldwide.

Praise for Investment Performance Measurement

"This volume contains the insights of more than fifty prominent authorities on performance measurement. It is a must-have, must-read book for anyone involved in measuring, analyzing, or explaining investment results."
-John Schlifske, CFA,

President and Chief Executive Officer, Russell Investments

"Investment Performance Measurement: Evaluating and Presenting Results should be required reading for investors as well as investment performance professionals. This collection conveniently brings together some of the definitive texts on performance and risk analysis that are core to the investment profession."
-Frances Barney, CFA,

Managing Director, BNY Mellon Asset Servicing Performance & Risk Analytics

"It is vitally important that performance analysts remain well versed in the academic work that has been published in their field. This book is unique in that it assembles some of the most important papers in the field of performance measurement into one volume. This book should be read by all performance analysts who are serious about advancing in their field."
-Neil Riddles, CFA, CIPM,

Hansberger Global Investors, Inc.

Foreword xi
Robert R. Johnson, CFA
Introduction 1
Philip Lawton, CFA, CIPM, and Todd Jankowski, CFA
Part I: Overview of Performance Evaluation
Chapter 1 Evaluating Portfolio Performance 11
Jeffery V. Bailey, CFA, Thomas M. Richards, CFA, and David E. Tierney
Reprinted from Managing Investment Portfolios: A Dynamic Process, 3rd Edition (John Wiley & Sons, 2007):717-780.
Part II: Performance Measurement
Chapter 2 Benchmarks and Investment Management 81
Laurence B. Siegel
Reprinted from the Research Foundation of CFA Institute (2003).
Chapter 3 The Importance of Index Selection 189
Christopher G. Luck, CFA
Reprinted from AIMR Conference Proceedings: Benchmarks and Attribution Analysis
(June 2001):4-12.
Chapter 4 After-Tax Performance Evaluation 203
James M. Poterba
Reprinted from AIMR Conference Proceedings: Investment Counseling for Private Clients II (August 2000):58-67.
Chapter 5 Taxable Benchmarks: The Complexity Increases 217
Lee N. Price, CFA
Reprinted from AIMR Conference Proceedings: Investment Counseling for Private Clients III (August 2001):54-64.
Chapter 6 Overcoming Cap-Weighted Bond Benchmark Deficiencies 233
William L. Nemerever, CFA
Reprinted from CFA Institute Conference Proceedings Quarterly (December 2007):55-66.
Chapter 7 Yield Bogeys 251
Brent Ambrose and Arthur Warga
Reprinted from Financial Analysts Journal (September/October 1996):63-68.
Chapter 8 Jumping on the Benchmark Bandwagon: Benchmark Methodologies Are the Subject of Vigorous Debate 259
Crystal Detamore-Rodman
Reprinted from CFA Magazine (January/February 2004):54-55.
Part III: Performance Attribution
Chapter 9 Determinants of Portfolio Performance 267
Gary P. Brinson, L. Randolph Hood, CFA, and Gilbert L. Beebower
Reprinted from Financial Analysts Journal (July/August 1986):39-44.
Chapter 10 Determinants of Portfolio Performance II: An Update 277
Gary P. Brinson, Brian D. Singer, CFA, and Gilbert L. Beebower
Reprinted from Financial Analysts Journal (May/June 1991):40-48.
Chapter 11 Determinants of Portfolio Performance-20 Years Later 289
L. Randolph Hood, CFA
Reprinted from Financial Analysts Journal (September/October 2005):6-8.
Chapter 12 Equity Portfolio Characteristics in Performance Analysis 293
Stephen C. Gaudette, CFA, and Philip Lawton, CFA, CIPM
Reprinted from CFA Institute (2007).
Chapter 13 Mutual Fund Performance: Does Fund Size Matter? 307
Daniel C. Indro, Christine X. Jiang, Michael Y. Hu, and Wayne Y. Lee
Reprinted from the Financial Analysts Journal (May/June 1999):74-87.
Chapter 14 Multiperiod Arithmetic Attribution 327
José Menchero, CFA
Reprinted from the Financial Analysts Journal (July/August 2004):76-91.
Chapter 15 Optimized Geometric Attribution 351
José Menchero, CFA
Reprinted from the Financial Analysts Journal (July/August 2005):60-69.
Chapter 16 Custom Factor Attribution 367
José Menchero, CFA, and Vijay Poduri, CFA
Reprinted from the Financial Analysts Journal (March/April 2008):81-92.
Chapter 17 Return, Risk, and Performance Attribution 387
Kevin Terhaar, CFA
Reprinted from AIMR Conference Proceedings: Benchmarks and Attribution Analysis
(June 2001):21-27.
Chapter 18 Global Asset Management and Performance Attribution 397
Denis S. Karnosky and Brian D. Singer, CFA
Reprinted from The Research Foundation of CFA Institute (February 1994).
Chapter 19 Currency Overlay in Performance Evaluation 457
Cornelia Paape
Reprinted from Financial Analysts Journal (March/April 2003):55-68.
Part IV: Performance Appraisal
Chapter 20 On the Performance of Hedge Funds 481
Bing Liang
Reprinted from the Financial Analysts Journal (July/August 1999):72-85.
Chapter 21 Funds of Hedge Funds: Performance and Persistence 501
Stan Beckers
Reprinted from CFA Institute Conference Proceedings Quarterly (June 2007):25-33.
Chapter 22 Hedge Fund Due Diligence: Putting Together the Pieces of the Mosaic Helps Reveal Operational Risks 513
Cynthia Harrington, CFA
Reprinted from CFA Magazine (May/June 2003):54-55.
Chapter 23 Putting Risk Measurement in Context: Why One Size Does Not Fit All 517
Cynthia Harrington, CFA
Reprinted from CFA Magazine (March/April 2004):44-45.
Chapter 24 Conditional Performance Evaluation, Revisited 521
Wayne E. Ferson and Meijun Qian
Reprinted from the Research Foundation of CFA Institute (September 2004).
Chapter 25 Distinguishing True Alpha from Beta 591
Laurence B. Siegel
Reprinted from CFA Institute Conference Proceedings: Challengesand Innovation in Hedge Fund Management (July 2004):20-29.
Chapter 26 A Portfolio Performance Index 605
Michael Stutzer
Reprinted from the Financial Analysts Journal (May/June 2000):52-61.
Chapter 27 Approximating the Confidence Intervals for Sharpe Style Weights 619
Angelo Lobosco and Dan DiBartolomeo
Reprinted from Financial Analysts Journal (July/August 1997):80-85.
Chapter 28 The Statistics of Sharpe Ratios 629
Andrew W. Lo
Reprinted from the Financial Analysts Journal (July/August 2002):36-52.
Chapter 29 Risk-Adjusted Performance: The Correlation Correction 653
Arun S. Muralidhar
Reprinted with updates from the Financial Analysts Journal (September/ October 2000):63-71.
Chapter 30 Index Changes and Losses to Index Fund Investors 669
Honghui Chen, Gregory Noronha, CFA, and Vijay Singal, CFA
Reprinted from the Financial Analysts Journal (July/August 2006):31-47.
Chapter 31 Information Ratios and Batting Averages 693
Neil Constable and Jeremy Armitage, CFA
Reprinted from the Financial Analysts Journal (May/June 2006):24-31.
Chapter 32 The Information Ratio 705
Thomas H. Goodwin
Reprinted from the Financial Analysts Journal (July/August 1998):34-43.
Chapter 33 Does Asset Allocation Policy Explain 40, 90, or 100 Percent of Performance? 719
Roger G. Ibbotson and Paul D. Kaplan
Reprinted from the Financial Analysts Journal (January/February 2000):26-33.
Chapter 34 Fund Management Changes and Equity Style Shifts 731
John G. Gallo and Larry J. Lockwood
Reprinted from Financial Analysts Journal (September/October 1999):44-52.
Chapter 35 Managing Performance: Monitoring and Transitioning Managers 745
Louisa Wright Sellers
Reprinted from AIMR Conference Proceedings: Investment Counseling for Private Clients IV (August 2002):32-39.
Chapter 36 Does the Emperor Wear Clothes or Not? The Final Word (or Almost) on the Parable of Investment Management 757
Philip Halpern, Nancy Calkins, and Tom Ruggels
Reprinted from Financial Analysts Journal (July/August 1996):9-15.
Chapter 37 Does Historical Performance Predict Future Performance? 767
Ronald N. Kahn and Andrew Rudd
Reprinted from Financial Analysts Journal (November/December 1995):43-52.
Chapter 38 Evaluating Fund Performance in a Dynamic Market 785
Wayne E. Ferson and Vincent A. Warther
Reprinted from Financial Analysts Journal (November/December 1996):20-28.
Chapter 39 Investment Performance Appraisal 799
John P. Meier, CFA
Reprinted from CFA Institute (2008).
Chapter 40 Thinking Outside the Box: Risk Management Firms Put a Creative Spin on Coupling Theory with Practice 815
Susan Trammell, CFA
Reprinted from CFA Magazine (March/April 2004):32-35.
Part V: Global Investment Performance Standards
Chapter 41 Global Investment Performance Standards 825
Philip Lawton, CFA, CIPM, and W. Bruce Remington, CFA
Reprinted from Managing Investment Portfolios: A Dynamic Process, 3 ed. (John Wiley & Sons, 2007):783-855.
Appendix A Global Investment Performance Standards (GIPS®) 899
Reprinted from the CFA Institute Centre for Financial Market Integrity (February 2005).
Appendix B Corrections to GIPS Standards 2005: Last Updated October 31, 2006 951
About the Contributors 953
Index 956