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CFA Level III > Performance Eval > Flashcards

Performance Eval Flashcards

1
Q

Performance Evaluation

A
  1. performance measurement - rate of return
  2. performance attribution - sources of return
  3. performance appraisal - luck vs skill
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2
Q

TWRR

A

time weighted rate of return; geometric rate of return

not impacted by external cash flows

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3
Q

Return CF at Beginning

A
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4
Q

Return CF at End

A
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7
Q

MWRR

A

money weighted rate of return

FV = PV( 1 + r )n + CF( 1 + r )n

impacted by CFs; used when manager controls timing of CFs

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8
Q

Portfolio Return

A

P = Manager + Style + Active Return

Style (TAA, client) = Benchmark - Index Return

Act Return (manager) = Portfolio - Benchmark Return

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9
Q

Benchmark Characteristics

A
  1. specified in advance
  2. appropriate
  3. measurable
  4. unambiguous
  5. relective of manager’s style
  6. accountable
  7. investable
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10
Q

Benchmark Types

A
  1. absolute return
  2. manager universe
  3. market index
  4. style index
  5. factor-model-based
  6. returns based
  7. custom security-based
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11
Q

Tests of Benchmark Quality

A
  1. min systematic bias
  2. low tracking error
  3. high coverage ratio
  4. low turnover
  5. positive active positions
  6. similar risk characteristics
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12
Q

Micro Performance Attribution

A
  1. pure sector allocation
  2. within sector selection
  3. allocation/ selection interaction
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13
Q

Pure Sector Allocation

A

over/under weight sectors

Σ (wp - wb) (rb - roverall benchmark)

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14
Q

Within Sector Selection

A

security selection

Σ wb (rp - rb)

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15
Q

Allocation/ Selection Interaction

A

Σ (wp - wb) (rp - rb)

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16
Q

Macro Performance Attribution

A
  1. policy allocations
  2. benchmarks returns
  3. fund returns, valuations, external CF
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17
Q

Macro Attribution Analysis

A

break down portfolio return by

  1. net contributions
  2. rf
  3. asset categories (SAA)
  4. benchmarks (TAA)
  5. inv manager
  6. allocation effects (error term)
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18
Q

Fundamental Factor Model

Micro Attribution

A
  1. identify factors
  2. determine beginning exposure to factors (BM)
  3. active exposure
  4. active impact
19
Q

FI Attribution Analysis

A
  1. int rate effect (BM return)
  2. int rate management (duration, convexity, yeild curve)
  3. sector/ quality management
  4. security selection
  5. traing effect (error)
20
Q

Alpha

A

risk adj return; systematic risk (β)

α = Rp - [rf + β ( RM - rf )]

21
Q

Treynor Measure

A

return on risk; systematic risk (β)

T = ( Rp - rf ) / β

22
Q

Sharpe Ratio

A

return on risk; total risk (SD)

SR = ( Rp - rf ) / σp

23
Q

M2

A

return on risk; total risk (SD)

M2 = rf + [( Rp - rf ) / σp] σm

24
Q

IR

A

information ratio

IR = active return/ active risk = ( Rp - Rb ) / ( σp - σb )

CFA Level III (12 decks)

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