Professional articles and academic papers on performance analysis. Attribution analysis seeks to compare the return from a fund with the return from a benchmark, and to explain the differences by decomposing the excess return into its component parts. Some of our most popular research on attribution analysis considers performance attribution methodology from first principles, providing... a primer on attribution analysis and models. Others white papers and reports focus on particular models, such as the Brinson Model, fixed income return attribution, equity attribution analysis, or the dissecting of hedge fund returns. A key aspect of performance is of course reporting to clients, and here the CFA provides guidance for effective investment reporting with its Principles for Investment Reporting model, known as GIPS (Global Investment Performance Standards) and encapsulated in the GIPS Handbook. A proper attribution of returns illuminates the contribution made by active managers, enabling judgements to be formed of whether excess returns have arisen from skill or luck. For most investment strategies, however, an extended period of time is required before such judgements can be made with any confidence.
In this paper for the Journal of Portfolio Management, Robert D. Arnott, Denis B. Chaves, and Tzee-man Chow examine the interplay that exists between the Shiller P/E ratio and the macroeconomy.
The authors propose a practical technique to correct for survivorship bias across return distributions for investment product universes. The technique is designed to work efficiently in a large-scale performance measurement environment. It uses all available data for survivors and non-survivors, corrects for bias across the…
This paper examines the performance of actively managed funds on a risk-adjusted basis.
Modern portfolio theory (MPT) states that expectations of returns must be accompanied by risk or variation around the expected return. It assumes that higher risk should be compensated, on average, by higher returns. Beyond…
The number of equity multifactor funds has mushroomed. In this paper, we present a framework to help investors better understand these funds' approaches to portfolio construction and set realistic expectations. To bring this framework to life, we apply it to a selection of multifactor funds in a series of fund profiles.
Global active bond funds are not all created equal. Vanguard's latest research paper, Global active bond fund returns: A factor decomposition, analyzes 15 types of these funds to determine the sources of their results. How much can be explained by risk factors including term, credit, currency, and high yield, and how…
This issue compares factor investing to the two other common investment approaches: traditional alpha strategies and market cap-weighted indexing. We argue that each of these three distinct investment approaches has its own merits and purposes and that, by understanding these differences, investors can make more informed…
This paper by Axioma examines the impact of increasing levels of constraints on the risk profile and performance of a global Value portfolio. The authors compare the results with two other types of strategies that, in the interest of keeping the size of the papers manageable, will be detailed separately: global Value and…
This paper by Axioma examines the impact of increasing levels of constraints on the risk profile and performance of a global Value portfolio. The authors compare the results with two other types of strategies that, in the interest of keeping the size of the papers manageable, will be detailed separately: global Low…
This paper by Axioma examines the impact of increasing levels of constraints on the risk profile and performance of a global Momentum portfolio. The authors compare the results with two other types of strategies that, in the interest of keeping the size of the papers manageable, will be detailed separately: global Low…
The China A-Share market presents a compelling opportunity for quality growth managers, thanks in part to its growing new economy. In this paper, William Blair's Vivian Lin Thurston, CFA, partner, global research analyst, discusses three investible themes in China: a growing middle class, an innovation boom, and growth in…
In this paper, we explore whether active equity manager outperformance is cyclical. To help inform this discussion, we review the historical trends of how active equity managers have fared, identify the significant variables that have adversely impacted active equity management since the Global Financial Crisis (“GFC”), and…
This paper shows how the S&P 500 Equal Weight Index can have fundamental appeal for market participants who subscribe to the notion that market-cap weighting exhibits momentum bias and potentially leads to concentration and overvaluation issues.
The Global Investment Performance Standards (GIPS®) is a set of standardized, industry-wide ethical principles that guide investment firms on how to calculate and present their investment results to prospective clients.
The phrase “past performance is not an indicator of future outcomes” (or some variation thereof) can be found in the fine print of most mutual fund literature. Yet, due to either force of habit or conviction, investors and advisors consider past performance and related metrics to be important factors in fund selection. So…
The spreads between bonds change every day. Sometimes it’s for obvious fundamental reasons, like global or company specific news, earnings announcements, or changes in capital structure. Other times, spreads move due to supply and demand technicals, human behavior, or flawed analysis—factors that have nothing to do with the…
This paper shows that unweighted indexes have outperformed weighted indexes and that the S&P400 and the S&P600 have outperformed the S&P500. $100 invested in the S&P500 in January 2000 became $252.6 in April 2018, but invested in the S&P600 became $577.2, invested in the 30% smallest companies (equal…
The SPIVA Australia Scorecard reports on the performance of actively managed Australian mutual funds against their respective benchmark indices over 1-, 3-, 5-,10-, and 15-year investment horizons. In this scorecard, we evaluated returns of more than 849 Australian equity funds (large, mid, and small cap, as well as A-REIT…
In this report, we measure the performance persistence of active funds that outperformed their peers and benchmarks over consecutive three and five-year periods, and we analyze their transition matrices over subsequent periods.
The S&P 500® was up 3.03% in August, bringing the YTD return to 8.52%. The Dow Jones Industrial Average® gained 2.16% for the month and was up 5.04% YTD. The S&P MidCap 400® was up 3.03% for the month and up 7.58% YTD. The S&P SmallCap 600® was up 4.72% in August and up 17.31% YTD.
The well-established negative relation between expense ratios and future net-of-fees performance of actively managed equity mutual funds guides portfolio decisions of institutional and retail investors. We show that this relation is an artifact of the failure to adjust performance for exposure to the profitability and…
