Practical Risk-Adjusted Performance Measurement - Carl R Bacon

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Résumé :

Chapter 1 Introduction 15

Definition of risk 15

Risk types 15

Risk management v Risk control 18

Risk aversion 19

Ex-post and ex-ante 19

Dispersion 20

Chapter 2 Descriptive statistics 21

Mean (or arithmetic mean) 21

Annualised return 22

Continuously compounded returns (or log returns) 22

Winsorised mean 23

Mean absolute deviation (or mean deviation) 24

Variance 25

Mean difference (absolute mean difference or Gini mean difference) 30

Relative mean difference 31

Bessel's correction (population or sample, n or n-1) 31

Sample variance 35

Standard deviation (variability or volatility) 36

Annualised risk (or time aggregation) 37

The Central Limit Theorem 38

Frequency and number of data points 38

Alternative risk annualisation methods 39

Normal (or Gaussian) distribution 40

Histograms 42

Skewness (Fisher's or moment skewness) 43

Sample skewness 44

Kurtosis (Pearson's kurtosis) 45

Excess kurtosis (or Fisher's kurtosis) 47

Sample kurtosis 47

Bera-Jarque statistic (or Jarque-Bera) 48

Covariance 53

Sample covariance 54

Correlation (?) 54

Sample correlation 55

Autocovariance 55

Autocorrelation (or serial correlation) 57

Annualised variability if returns are autocorrelated 60

Chapter 3 APPRAISAL MEASURES 62

Performance appraisal 62

Sharpe ratio (reward to variability, Sharpe index) 63

Roy ratio 65

Risk-free rate 66

Alternative Sharpe ratio 66

Revised Sharpe ratio 67

Adjusted Sharpe Ratio 68

Skew-adjusted Sharpe Ratio 69

Skewness-Kurtosis ratio 74

Alternative adjusted Sharpe Ratios 74

Smoothing-adjusted Sharpe Ratio 75

MAD ratio 76

Gini ratio 76

Relative risk 77

Tracking error (or tracking risk, relative risk, active risk) 77

Relative skewness 78

Relative kurtosis 79

Information ratio 79

Geometric information ratio 80

Modified information ratio 87

Adjusted information ratio 88

Skew-adjusted information ratio 88

Chapter 4: Regression Analysis 94

Regression analysis 94

Regression equation 95

Regression alpha 95

Regression beta 95

Regression epsilon 95

Capital Asset Pricing Model (CAPM) 96

Beta?(?) (systematic risk or volatility) 97

Jensen's alpha (Jensen's measure or Jensen's differential return or ex-post alpha) 97

Annualised alpha 98

Bull beta?(?⁺) 106

Bear beta (?-) 106

Beta timing ratio 106

Market timing 107

Systematic risk 115

Correlation 115

R2(or coefficient of determination) 116

Specific (or residual) risk 117

The Geometry of Risk 120

Treynor ratio? (Reward to volatility) 124

Modified Treynor ratio 124

Appraisal ratio (or Treynor-Black ratio) 125

Modified Jensen 126

Fama decomposition 126

Selectivity 127

Diversification 127

Net selectivity 127

Fama-French three factor model 128

Three factor alpha (or Fama-French alpha) 129

Carhart four factor model 129

Four factor alpha (or Carhart's alpha) 130

Types of Alpha 130

Multi-factor Models 131

Chapter 5 Drawdown 132

Drawdown 132

Average drawdown 132

Maximum drawdown 133

Largest individual drawdown 133

Recovery time (or drawdown duration) 133

Drawdown deviation 134

Ulcer index 134

Pain index 135

Calmar ratio (or Drawdown ratio) 136

MAR...

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Sommaire:

PRACTICAL RISK-ADJUSTED PERFORMANCE MEASUREMENT

An indispensable to ex-post risk measurement

While many examinations of risk tend towards mathematical complexity, the latest edition of Practical Risk-adjusted Performance Measurement delivers a practical, insightful, and comprehensive discussion of ex-post risk measurement. Filled with implementable and user-friendly content, this book transforms the subject of risk into a straightforward and immensely useful resource.

The book is written from a buy-side, asset management perspective and includes a companion website that hosts supporting documents, worked examples, and a Periodic Table of Risk. In this new edition, readers will also find the most up-to-date measures accompanied by illustrative explanations. From the fundamentals of risk to regression measures, risk-adjusted returns, and the four dimensions of performance, Carl R. Bacon offers readers a roadmap to the selection and implementation of appropriate risk measures in a wide variety of different investment scenarios.

Practical Risk-adjusted Performance Measurement remains the industry-leading guide to the application of risk measures in the real-world. It is ideal for portfolio managers, investment performance analysts, and others who need a one-stop resource to help build their understanding of risk-adjusted performance....