Monday, December 27, 2010

Performance

Performance refers to the results of an investment over a certain time frame, typically also referred to as return. When examining the performance of an investment you can do very basic analysis like percentage returns, total returns, annualised returns, compounding growth rates, holding period returns, etc. You can also engage in more detailed and scientific performance analysis by calculating risk adjusted return metrics like the Sharpe ratio, Jensen's Alpha, Beta, Tracking error, Information ratio, and so-on. It is important to analyze returns from a sound basis in terms of metrics, but also in terms of consistency in application across the funds or assets you are looking at. Performance analysis is useful for tracking how your portfolio has performed, but also in assessing the past performance of prospective investments.

Synonyms: Returns, Investment return, Investment performance, Fund performance

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