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<p>Foreword xi</p> <p>Robert R. Johnson, CFA</p> <p>Introduction 1<br /><i>Philip Lawton, CFA, CIPM, and Todd Jankowski, CFA</i></p> <p><b>PART I: OVERVIEW OF PERFORMANCE EVALUATION</b></p> <p>CHAPTER 1 Evaluating Portfolio Performance 11<br /><i>Jeffery V. Bailey, CFA, Thomas M. Richards, CFA, and David E. Tierney</i></p> <p><b>PART II: PERFORMANCE MEASUREMENT</b></p> <p>CHAPTER 2 Benchmarks and Investment Management 81<br /><i>Laurence B. Siegel</i></p> <p>CHAPTER 3 The Importance of Index Selection 189<br /><i>Christopher G. Luck, CFA</i></p> <p>CHAPTER 4 After-Tax Performance Evaluation 203<br /><i>James M. Poterba</i></p> <p>CHAPTER 5 Taxable Benchmarks: The Complexity Increases 217<br /><i>Lee N. Price, CFA</i></p> <p>CHAPTER 6 Overcoming Cap-Weighted Bond Benchmark Defi ciencies 233<br /><i>William L. Nemerever, CFA</i></p> <p>CHAPTER 7 Yield Bogeys 251<br /><i>Brent Ambrose and Arthur Warga</i></p> <p>CHAPTER 8 Jumping on the Benchmark Bandwagon: Benchmark Methodologies Are the Subject of Vigorous Debate 259<br /><i>Crystal Detamore-Rodman</i></p> <p><b>PART III: PERFORMANCE ATTRIBUTION</b></p> <p>CHAPTER 9 Determinants of Portfolio Performance 267<br /><i>Gary P. Brinson, L. Randolph Hood, CFA, and Gilbert L. Beebower</i></p> <p>CHAPTER 10 Determinants of Portfolio Performance II: An Update 277<br /><i>Gary P. Brinson, Brian D. Singer, CFA, and Gilbert L. Beebower</i></p> <p>CHAPTER 11 Determinants of Portfolio Performance—20 Years Later 289<br /><i>L. Randolph Hood, CFA</i></p> <p>CHAPTER 12 Equity Portfolio Characteristics in Performance Analysis 293<br /><i>Stephen C. Gaudette, CFA, and Philip Lawton, CFA, CIPM</i></p> <p>CHAPTER 13 Mutual Fund Performance: Does Fund Size Matter? 307<br /><i>Daniel C. Indro, Christine X. Jiang, Michael Y. Hu, and Wayne Y. Lee</i></p> <p>CHAPTER 14 Multiperiod Arithmetic Attribution 327<br /><i>José Menchero, CFA</i></p> <p>CHAPTER 15 Optimized Geometric Attribution 351<br /><i>José Menchero, CFA</i></p> <p>CHAPTER 16 Custom Factor Attribution 367<br /><i>José Menchero, CFA, and Vijay Poduri, CFA</i></p> <p>CHAPTER 17 Return, Risk, and Performance Attribution 387<br /><i>Kevin Terhaar, CFA</i></p> <p>CHAPTER 18 Global Asset Management and Performance Attribution 397<br /><i>Denis S. Karnosky and Brian D. Singer, CFA</i></p> <p>CHAPTER 19 Currency Overlay in Performance Evaluation 457<br /><i>Cornelia Paape</i></p> <p><b>PART IV: PERFORMANCE APPRAISAL</b></p> <p>CHAPTER 20 On the Performance of Hedge Funds 481<br /><i>Bing Liang</i></p> <p>CHAPTER 21 Funds of Hedge Funds: Performance and Persistence 501<br /><i>Stan Beckers</i></p> <p>CHAPTER 22 Hedge Fund Due Diligence: Putting Together the Pieces of the Mosaic Helps Reveal Operational Risks 513<br /><i>Cynthia Harrington, CFA</i></p> <p>CHAPTER 23 Putting Risk Measurement in Context: Why One Size Does Not Fit All 517<br /><i>Cynthia Harrington, CFA</i></p> <p>CHAPTER 24 Conditional Performance Evaluation, Revisited 521<br /><i>Wayne E. Ferson and Meijun Qian</i></p> <p>CHAPTER 25 Distinguishing True Alpha from Beta 591<br /><i>Laurence B. Siegel</i></p> <p>CHAPTER 26 A Portfolio Performance Index 605<br /><i>Michael Stutzer</i></p> <p>CHAPTER 27 Approximating the Confi dence Intervals for Sharpe Style Weights 619<br /><i>Angelo Lobosco and Dan DiBartolomeo</i></p> <p>CHAPTER 28 The Statistics of Sharpe Ratios 629<br /><i>Andrew W. Lo</i></p> <p>CHAPTER 29 Risk-Adjusted Performance: The Correlation Correction 653<br /><i>Arun S. Muralidhar</i></p> <p>CHAPTER 30 Index Changes and Losses to Index Fund Investors 669<br /><i>Honghui Chen, Gregory Noronha, CFA, and Vijay Singal, CFA</i></p> <p>CHAPTER 31 Information Ratios and Batting Averages 693<br /><i>Neil Constable and Jeremy Armitage, CFA</i></p> <p>CHAPTER 32 The Information Ratio 705<br /><i>Thomas H. Goodwin</i></p> <p>CHAPTER 33 Does Asset Allocation Policy Explain 40, 90, or 100 Percent of Performance? 719<br /><i>Roger G. Ibbotson and Paul D. Kaplan</i></p> <p>CHAPTER 34 Fund Management Changes and Equity Style Shifts 731<br /><i>John G. Gallo and Larry J. Lockwood</i></p> <p>CHAPTER 35 Managing Performance: Monitoring and Transitioning Managers 745<br /><i>Louisa Wright Sellers</i></p> <p>CHAPTER 36 Does the Emperor Wear Clothes or Not? The Final Word (or Almost) on the Parable of Investment Management 757<br /><i>Philip Halpern, Nancy Calkins, and Tom Ruggels</i></p> <p>CHAPTER 37 Does Historical Performance Predict Future Performance? 767<br /><i>Ronald N. Kahn and Andrew Rudd</i></p> <p>CHAPTER 38 Evaluating Fund Performance in a Dynamic Market 785<br /><i>Wayne E. Ferson and Vincent A. Warther</i></p> <p>CHAPTER 39 Investment Performance Appraisal 799<br /><i>John P. Meier, CFA</i></p> <p>CHAPTER 40 Thinking Outside the Box: Risk Management Firms Put a Creative Spin on Coupling Theory with Practice 815<br /><i>Susan Trammell, CFA</i></p> <p><b>PART V: GLOBAL INVESTMENT PERFORMANCE STANDARDS</b></p> <p>CHAPTER 41 Global Investment Performance Standards  825<br /><i>Philip Lawton, CFA, CIPM, and W. Bruce Remington, CFA</i></p> <p>APPENDIX A Global Investment Performance Standards (GIPS®) 899</p> <p>APPENDIX B Corrections to GIPS Standards 2005: Last Updated October 31, 2006 951</p> <p>About the Contributors 953</p> <p>Index 956</p>

<p><b>PHILIP LAWTON, P<small>H</small>D, CFA, CIPM,</b> heads the Certificate in Investment Performance Measurement (CIPM) program at CFA Institute. His previous experience includes serving as vice president at State Street Analytics, where he supported the investment consulting firms that belong to the Independent Consultants Cooperative, and at Citibank, where he headed U.S. performance measurement in Worldwide Securities Services. Lawton is a frequent speaker on institutional investing and performance measurement at industry conferences. <p><b>TODD JANKOWSKI, CFA,</b> is Director of Curriculum Development for the Certificate in Investment Performance Measurement (CIPM) program at CFA Institute. Prior to joining CFA Institute, he was head of investment research in the Wealth Management division of Northwestern Mutual Life Insurance Company, where he had earlier held investment management positions in the Retail Advisory and Institutional Private Placement divisions.

<p><b>Investment Performance Measurement</b> <p>Over the past two decades, the importance of measuring, presenting, and evaluating investment performance results has dramatically increased. With the growth of capital market data services, the development of quantitative analytical techniques, and the widespread acceptance of Global Investment Performance Standards (GIPS^®), this discipline has emerged as a central component of effective asset management and, thanks in part to the Certificate in Investment Performance Measurement (CIPM) program, has become a recognized area of specialization for investment professionals. <p>That's why <i>Investment Performance Measurement: Evaluating and Presenting Results</i>—the second essential title in the CFA Institute Investment Perspectives series—has been created. CFA Institute has a long tradition of publishing content from industry thought leaders, and now this new collection offers unparalleled guidance to those working in the rapidly evolving field of investment management. <p>Drawing from the Research Foundation of CFA Institute, the <i>Financial Analysts Journal,</i> CFA <i>Institute Conference Proceedings Quarterly,</i> CFA <i>Magazine,</i> and the CIPM curriculum, this reliable resource taps into the vast store of knowledge of some of today's most prominent thought leaders—from industry professionals to respected academics—who have focused on investment performance evaluation for a majority of their careers. <p>Divided into five comprehensive parts, this timely volume opens with an extensive overview of performance measurement, attribution, and appraisal. Here, you'll become familiar with everything from the algebra of time-weighted and money-weighted rates of return to the objectives and techniques of performance appraisal. <p>After this informative introduction, <i>Investment Performance Measurement</i> moves on to: <ul> <li>Provide a solid understanding of the theoretical grounds for benchmarking and the trade-offs encountered during practice in Part II: Performance Measurement</li> <li>Describe the different aspects of attribution analysis as well as the determinants of portfolio performance in Part III: Performance Attribution</li> <li>Address everything from hedge fund risks and returns to fund management changes and equity style shifts in Part IV: Performance Appraisal</li> <li>Recount the history and explain the provisions of the GIPS standards—with attention paid to the many practical issues that arise in the course of its implementation—in Part V: Global Investment Performance Standards</li> </ul> <p>Filled with invaluable insights from more than fifty experienced contributors, this practical guide will enhance your understanding of investment performance measurement and put you in a better position to present and evaluate results in the most effective way possible.

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