Rolling Period Analysis

One problem with the runs test as a measure of performance consistency is that the runs test accounts for whether or not there was value added, but not for the size of the value added. We can use the risk-adjusted return measures to look for both evidence of and magnitude of consistent performance. First we calculate the major risk, return, and relative risk-adjusted return statistics for the period in the spreadsheet below. We can see that Funds B and C dominate Fund A in all respects, with...

Mutual Fund Return Calculation

Although the treatment of investment expenses and taxes is specific to the vehicle and investor situation, the calculation of returns for mutual funds forms a case study for calculating returns that include the effects of fees and taxes. Mutual funds are vehicles for commingled investment that are marketed to the retail investor. Mutual funds and other similar products require performance calculations that reflect the impact of unitized valuations, dividend distributions, loads and other sales...

Market Indices

Practitioners have come to accept that a peer group universe does not fulfill all of the requirements for a good measure of relative performance. Jeffrey Bailey set out the criteria of a good performance comparison benchmark, which is unambiguous, investable, measurable, appropriate, and specified in advance.1 Peer group universes do not enjoy all of these ideal characteristics. For example, we cannot invest in an asset called the median manager return. But we still need to understand whether...