During a recent Performance Measurement Think Tank call, I responded to the following question: When calculating the beta of the holdings in a portfolio (not the trailing returns), do you use the 1) trailing returns of the current holdings or 2) the returns of the...
Performance Perspectives Blog
Thoughts on performance measurement from David Spaulding and other members of our team.
Calculating beta … what to use?
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ANNOUNCING: A Free GIPS for Asset Owners Webinar
The long-awaited publication of the final GIPS for Asset Owners guidance statement has finally arrived, and so, we're hosting not one, but two: GIPS for Asset Owners Webinars! And what will we address? Well, let's turn to the "5 Ws" (and an H) for some help: Who GIPS...
I sense a need to clarify the differences between arithmetic and geometric excess returns
Don't focus on arithmetic vs. geometric attribution Of late there have been several comments regarding arithmetic and geometric attribution; but that's not what's important. What matters is The difference between arithmetic and geometric excess returns! And today's...
Can we begin to work on some of the confusion in GIPS? Let’s begin with GIPS discretion vs. Legal discretion?
I recently conducted a software certification of a software vendor's composite system, where they use the term "Discretionary" as a characteristic of accounts. They correctly point out to their clients that this term is meant from the "GIPS" view; that is, a...
Interaction Effect – Justified and Clarified
One of the frequently debated topics in performance measurement is the value of the interaction effect. In last week's post, Carl Bacon, CIPM suggested that I had made a "solid case for the stupidity of interaction." His disdain for this measure is legendary,...
The peril of venturing to places the index avoids: the confusing ways of off benchmark bets
I think this might be a record for blog post titles, but I came up with the second part, first, which is at the heart of the matter, and then the first came to me later, which adds some color to it. Dealing With Off Benchmark Bets What IS an "off benchmark...
Cash flow timing: it’s not as easy as you may think
While I have no empirical evidence to quickly draw upon, it's my belief that most firms either treat cash flows as "start-of-day" or "end-of-day" events. Such a convention is thought of as reasonable and even perhaps "best practice." Sadly, I must say that I believe...
The seven most confusing things about the GIPS standards
Several years ago I coined the "3 Cs of Performance Measurement": Confusion, Change, and Controversy. The GIPS(R) standards are all three, and today's post will touch on the "confusion" part, specifically the seven most confusing things about the GIPS® standards....
Geometric attribution has residuals, too!
Not for multi-periods, but for single periods, geometric attribution has residuals! In a recent post about multi-period attribution, I mentioned that while it's true that arithmetic attribution is "linking challenged," resulting in residuals that require a smoothing...
Multi-period Performance Attribution
There seems to be a lot of interest in discussing multi-period performance attribution. In one of the LinkedIn groups, we've had quite a dialogue going on for the past few weeks, spurred by questions raised by our colleague, Kathleen Seagle. I thought I'd briefly...