Measure account for risk, Risk Management

Assignment Help:

The asset management industry uses a variety of "performance measures" to asses the relative performance of managed portfolios or funds, mostly (but not always) relative to an appropriate benchmark. One such measure, the "Sharpe ratio", was introduced in the  lectures. The "Treynor ratio" is defined in very much the same way, with the only exception that the denominator is not the portfolio's volatility ("sigma"), but instead it's  "beta" (i.e. the slope coefficient in a CAPM-style regression of portfolio returns onto a benchmark). Another performance measure used frequently is "alpha" (the intercept in the aforementioned regression). There are other measures (e.g. "M2" or the "Information  Ratio"); feel free to include any of these in your discussion at your discretion.

(a) Provide a discussion of the characteristics of these performance measures (and any others you may choose to include). Discuss in particular:

  • What exactly is being measured?
  • How does the measure account for risk (and what kind of risk)?
  • What are the differences between the measures?

(b) Discuss what performance measure(s) you would employ (and why?) if you were any of the following:

  • The manager of a "fund of funds", selecting a portfolio of funds.
  • A "high-net-worth" individual choosing a hedge fund to invest in.
  • An individual choosing a pension fund to invest their life savings.

(c) Below are two statements that we found in articles on performance measures.

Chose either one of these statements and provide a brief discussion:

 Statement (1):

 Investors use performance measures to decide where to drop their money. But clearly, since very few of us can see into the future, we are constrained to using historical (past) data to compute those measures. But investors probably do not care about how much they would have made if they had invested in the fund in the past, but how much they will make in the future if they invest now. The question is thus, how much does past performance tell us about future performance? Based on the empirical evidence, the answer seems to be: very little!


Related Discussions:- Measure account for risk

Requirements to make a risk assessment successful, Question : (a) The ...

Question : (a) The garage manager of a motor vehicle mechanical repair workshop has decided to carry out a risk assessment to ensure compliance with the Occupational Safety an

Principles of a sensible risk management, Question 1: (a) Risk Assessm...

Question 1: (a) Risk Assessment is essentially a five steps process. Describe how each of these steps should be carried out to ensure a safe and healthy place of work. (b)

Beta, #queThe management of Nelson plc wish to estimate their firm’s equity...

#queThe management of Nelson plc wish to estimate their firm’s equity beta. Nelson has had a stock market quotation for only two months and the financial management feels that it w

Deciding the Use the Expert, AUsing the same situation from SLP 3, recall t...

AUsing the same situation from SLP 3, recall that you are deciding ... You have heard of an Expert who has a “track record” of high confidence in ... You are now considering whethe

Explain role of the project manage, Question 1: Explain role of the pro...

Question 1: Explain role of the project manager throughout a project life cycle with reference to the following. (a) Setting up a project team (and the factors he has to con

firms risk management strategies-tactics , 1. You are to analyze:  [1] in...

1. You are to analyze:  [1] internal financial options offered to employees as a benefit, [2] the external financial options that are offered by markets to outside investors who ma

How can risks be managed in the public sector, Question 1: i) How may ...

Question 1: i) How may risks be managed in the Public Sector? ii) Will e-government be an efficient means of providing financial information? Question 2: i) What a

Risks covered under the policy., An insurance company is investigating offe...

An insurance company is investigating offering kidnap and ransom insurance. Policies are to be sold to multinational companies to provide cover for certain named employees who are

What is a safe system of work, Question 1: Employers should conduct pro...

Question 1: Employers should conduct proper health risk assessment in order to identify and control health risks before they lead to losses. Describe the four stages involved i

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd