MIS 4500 Lecture Notes - S&P 500 Index, Survivorship Bias, Cash Flow

• School: University of Manitoba
• Department: Management Info. Systems
• Course: MIS 4500
• Professor: Pourang Irani

Document Summary

Fund sponsor"s perspective: enhances effectiveness of fund"s investment policy by acting as feedback and control mechanism. Investment manager"s perspective: feedback and control loop, helping to monitor proficiency of various aspects of portfolio construction process. 3 components of performance evaluation: 1. account"s performance? (performance measurement) 2. why did account produce observed performance? (performance attribution) 3. luck or skill? (performance appraisal) W/o intraperiod external cash flows: cash flow at start of period, cash flow at end of period: Total rate of return: measures increase in investor"s wealth due to both investment income and capital gains. Money-weighted rate of return (mwr): the irr. P = m + s + a: portfolio performance is equal to market return plus style return (together the benchmark return) plus the active management return. Properties of value benchmark: investable: unambiguous, measurable, appropriate. 001mvmvmvrt cfmvcfmvmvrt 001 001mvmvcfmvrt )()1(101111nlmnlmmrcfrcfrmvmv o reflective of current investment opinions: specified in advance, owned.