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…
It has been widely observed that capitalization-weighted indexes can be beaten by surprisingly simple, systematic investment strategies. Indeed, in the U.S. stock market, equal-weighted portfolios, random-weighted portfolios, and other naive, non-optimized portfolios tend to outperform a capitalization-weighted index over…
It has been widely observed that capitalization-weighted indexes can be beaten by surprisingly simple, systematic investment strategies. Indeed, in the U.S. stock market, equal-weighted portfolios, random-weighted portfolios, and other naive, non-optimized portfolios tend to outperform a capitalization-weighted index over…
In this 36-page paper, the authors calculate the factor exposures of selection and weighting (S&W) portfolios and then replicate those factor exposures using the FTSE Russell factor tilt methodology. This allows them to construct competing factor tilt portfolios that are substantially different in terms of construction…
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.
The biggest failure in investment management—the gap between the returns realized by the investor and the returns earned by the strategy or fund the investor owns—typically remains in the shadows with the glare of the spotlights focused on alpha. Smart beta is no exception. The authors propose two ways to reframe the client…
This paper offers a framework that allows for the estimation of relative research values across markets and constituents, under certain stylized (but reasonable) assumptions. We estimate value by adjusting dispersion, the difference in performance between winners and losers, for capacity, the potential size of active…
Multi-Asset Strategist Adam Berger addresses three topics that are top of mind with investors: where we are in the cycle, recent emerging market underperformance, and the lessons from the 2008 financial crisis that can be applied today.
S&P Dow Jones Indices has been the de facto scorekeeper of the ongoing active versus passive debate since the first publication of the SPIVA U.S. Scorecard in 2002. Over the years, we have built on our experience publishing the report by expanding scorecard coverage into Australia, Canada, Europe, India, South Africa,…
We assess whether observable corporate political strategies can serve as channels of value-relevant political information flow into stock prices and form the basis for profitable return predictability strategies. We document that returns of politically connected firms’ stocks lead those of their non-connected peers,…
The Morningstar European Active/Passive Barometer is a semiannual report that measures the performance of Europe-domiciled active funds against passive peers in their respective Morningstar Categories.
The Sharpe Ratio has become a standard measure of portfolio management performance, taking into account the risk side. In that framework, the consideration of risk is reduced to returns volatility. The Sharpe Ratio does not encompass extreme risk, especially on the downside. In this paper, we provide four methods for…
The 11-page paper by Capital Dynamics presents a model for private equity which breaks down the PE equity performance into base factor and four different premiums. It illustrates how the model works using the PE portfolio of two North American pension funds.
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…
The benefits of diversification are often touted, but many investors feel disappointed in diversified portfolios because of the dispersion in performance of the individual holdings. Since we only experience one path of history, it is difficult to assess the benefit of diversification unless we consider what could have…
