Lecture 6 - Portfolio Performance Evaluation I

Question 1

Most financial assets are managed by professional investors. What kind of questions should we be asking regarding this?

Answer 1

• Are they doing a good job?
• How does their performance compare with a passively managed portfolio (i.e. market portfolio)?
• Does the performance cover the difference in expenses (e.g. active management cost)?

Question 2

The evaluation of portfolio performance is…

Answer 2

Ex post in nature. This means that it is based on actual results rather than estimates/forecasts.