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| Preface | |
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| What Is Performance and Benchmarking? | |
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| The Basic Issue: Has Your Wealth Increased? | |
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| Was the Change in Wealth Worth the Risk? | |
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| Comparing Return with Alternative Investment Returns | |
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| Active Investing versus Passive Investing | |
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| Performance Attribution | |
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| Asset Class Return Expectations | |
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| The Expected Range of Returns from Different Kinds of Investments | |
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| What Range of Values Is Likely to Be Encountered? | |
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| Returns Without Cash Flows | |
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| Portfolio Market Value | |
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| Holding Period Return | |
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| Linking Returns | |
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| Rule of 72 | |
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| Average Returns | |
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| Average Return Per Period | |
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| Annualized Return | |
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| Compounding Frequency | |
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| Expected Return | |
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| Returns in the Presence of Cash Flows | |
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| Cash Flows | |
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| Unit Value Method | |
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| Time-Weighted Return | |
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| Linked Internal Rate of Return | |
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| The Dietz Method | |
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| Subportfolio Returns and Consistency | |
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| Time-Weighted versus Money-Weighted Returns | |
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| Comparing Two Portfolio Returns | |
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| Excess Returns Over a Benchmark-Past Performance | |
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| Compound Excess Return | |
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| Situations Where the Arithmetic Excess Return Is the Appropriate Choice | |
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| Recommended Practice | |
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| Some Foundations | |
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| The Risk-Free Rate | |
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| Market Equilibrium | |
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| The CAPM of Sharpe, Lintner, and Mossin | |
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| Arbitrage Pricing Theory (APT) and Other Asset Pricing Models | |
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| Estimating the Elements of the CAPM | |
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| The CAPM with Constant Alpha and Beta Over Time | |
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| Problems with the Use of Inappropriate Benchmarks | |
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| Other Estimation Problems | |
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| What Is Risk | |
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| Types of Risk | |
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| A Basic Measure of Risk as Volatility in Returns | |
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| Measuring Bad Variation | |
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| Covariance | |
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| Tracking Error and Residual Risk | |
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| Risk-Adjusted Return Measures | |
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| Sharpe Ratio | |
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| Sortino Ratio | |
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| Modigliani-Modigliani Measure | |
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| Jensen's Alpha | |
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| Treynor's Measure | |
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| Appraisal Ratio and Information Ratio | |
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| Comparing the Risk-Adjusted Measures | |
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| Fixed-Income Risk | |
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| Duration: Macaulay, Modified, and Effective Duration | |
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| Convexity | |
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| Prepayment Risk for Mortgages and Callables | |
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| Issuer-specific Risk, Default Risk, and Correlated Default Risk | |
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| Conditional Performance Evaluation | |
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| Models for Performance Measurement | |
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| Logic of Conditional Performance Evaluation | |
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| Unconditional Alphas and Betas | |
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| Time-Varying Conditional Betas | |
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| Time-Varying Conditional Alphas | |
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| Benchmark Portfolios | |
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| Implications for Investors | |
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| Market Timing | |
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| Merton-Henriksson Market Timing Model | |
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| Treynor-Mazuy Model | |
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| Up-Down Market Model: Up Market versus Down Market Beta | |
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| The Problem of Non-Timing-Related Nonlinearities | |
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| Factor Models | |
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| The Single Index Model | |
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| Multiple Factor Models | |
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| Factor Model Analytics | |
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| A Simple Example | |
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| Factors of Equity Returns in the United States | |
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| Various Factor Model Factors | |
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| The Barra Factors | |
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| Factor-Mimicking Portfolios: High-Low Approach and Factor Extraction Approach | |
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| Factor Model (Barra) Performance Attribution | |
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| Attribution "Executive Summary" | |
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| Total Annualized Attribution Chart | |
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| Annual Attribution Report | |
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| Annualized Contributions to Risk Indexes | |
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| Industries: Top-10 and Bottom-10 Contributors to Active Return | |
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| Asset Selection: Annualized Attribution | |
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| Contributions to Return | |
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| Performance Attribution | |
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| Sector-Based Attribution Framework | |
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| Single-Period Arithmetic Sector-Based Attribution | |
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| Linking Attribution Effects | |
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| Multiperiod Contributions to Return | |
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| Excess Return Recursion | |
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| An Idealized Attribution System | |
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| Logarithmic Linking Coefficients | |
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| A Link to Recursive Methods | |
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| Other Methods | |
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| Example | |
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| Other Topics | |
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| Notes | |
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| References | |
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| Benchmarks and Knowledge | |
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| Peer Universes | |
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| Passive Market Indexes | |
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| Manager-Specific Stock-Matching Benchmark: Normal Portfolios | |
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| For What Should a Manager Be Given Credit? | |
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| Elements of a Desirable Benchmark | |
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| Origins of U.S. Equity Benchmarks | |
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| The Fundamental Meaning and Purposes of a Financial Index | |
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| Where You Stand on the "Best" Indexes Depends on Where You Sit | |
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| The Best Index Is Based on Four Principles of Useful Indexes | |
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| Desirability Trade-Offs | |
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| Issues with Index Construction | |
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| The Paradox of Asset Management | |
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| Index Weighting | |
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| Advantages and Disadvantages of Capitalization Weighting | |
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| Portfolio Equity Characteristics: Capitalization Weighting versus Equal Weighting | |
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| Challenges to Capitalization Weighting | |
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| Practical Issues with Building Indexes | |
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| Index Calculations | |
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| Decisions That Have to Be Made by the Index Creator | |
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| Russell U.S. Equity Index Construction | |
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| Styles, Factors, and Equity Benchmarks | |
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| Defining Equity Style | |
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| Types of Equity Styles | |
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| Evidence of Styles | |
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| Historical Perspective on Styles | |
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| CAPM, Factor Models, and the Behavior of Styles | |
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| Which Equity Style Is Best? | |
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| Equity Style Indexes: Tools for Better Performance Evaluation and Plan Management | |
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| Introduction | |
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| Style Definitions | |
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| Performance Evaluation and Styles | |
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| Style Index Construction | |
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| Validation of Style Indexes | |
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| Uses of the Style Indexes | |
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| Conclusion | |
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| Russell Style Index Methodology | |
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| Style Index Algorithm | |
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| Rationale for Key Features | |
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| U.S. Equity Benchmarks | |
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| S&P and S&P/Citigroup Family of Indexes | |
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| Dow Jones Indexes | |
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| Russell Indexes | |
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| MSCI Family of Indexes | |
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| CRSP Composite and Decile Indexes | |
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| Other Indexes: NYSE and NASDAQ Indexes | |
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| Comparing Index Construction Issues | |
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| Index Comparisons | |
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| Conclusion | |
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| Global and International Equity Benchmarks | |
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| Global versus International | |
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| MSCI Index Family | |
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| Dow Jones Global Indexes | |
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| S&P/Citigroup Global Indexes | |
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| FTSE Index Family | |
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| Russell/Nomura Indexes | |
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| Russell Global Indexes | |
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| Conclusion | |
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| Fixed-Income Benchmarks | |
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| Fixed-Income Benchmark Construction Difficulties | |
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| Barclays Capital Family of Global Fixed-Income Indexes | |
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| Merrill Lynch Fixed-Income Index Family | |
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| J.P. Morgan Family of Fixed-Income Indexes | |
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| Real Estate Benchmarks | |
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| Real Estate Index Construction Issues | |
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| Private Real Estate Indexes | |
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| Publicly Traded Real Estate Security Indexes | |
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| Hedge Fund Universes | |
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| Hedge Funds as Absolute Return Strategies | |
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| Hedge Fund Indexes | |
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| Building a Good Hedge Fund Index | |
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| Inherent Problems with Universes of Hedge Funds | |
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| Available Hedge Fund Indexes | |
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| Determining Investment Style | |
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| Approaches to the Style Classification Problem | |
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| Effective Mix: A Returns-Based Methodology | |
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| Effective Mix Limitations and Maximizing Usefulness | |
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| Conclusion | |
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| GIPS: Global Investment Performance Standards | |
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| The Reason for GIPS | |
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| Overview of GIPS | |
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| Index | |