<br />
THE JOURNAL OF<br />
PERFORMANCE<br />
MEASUREMENT®<br />
THE PERFORMANCE MEASUREMENT RESOURCE VOLUME 24 : NUMBER 4<br />
VOLUME25:NUMBER4<br />
INSIDE THIS ISSUE - SUMMER 2021<br />
n WHAT IS A PERFORMANCE BOOK OF RECORD (PBOR), AND WHY IS IT<br />
IMPORTANT TO LEVERAGE DATA AS AN ASSET AND DRIVER OF GROWTH?<br />
n IS YOUR ASSET ALLOCATION EFFICIENT?<br />
n THE JOURNAL INTERVIEW - STATE STREET OFFICE HOURS SERIES:<br />
®<br />
GIPS STANDARDS FOR ASSET OWNERS<br />
n RISK-ADJUSTED PERFORMANCE ATTRIBUTION: A SYNTHESIS OF APPROACHES<br />
n INVESTMENT PERFORMANCE AND THE MONEY-WEIGHTED RATE OF RETURN:<br />
THE PROBLEM OF MULTIPLE RATES<br />
n LANDMARK ARTICLE: REFORMULATING ANKRIM'S RISK-ADJUSTED<br />
PERFORMANCE ATTRIBUTION<br />
A PUBLICATION OF THE SPAULDING GROUP, INC.<<a title="JPM_Summer2021_25-4 page 1" href="http://viewer.zmags.com/publication/73f0d929?page=1"> THE JOURNAL OF PERFORMANCE MEASUREMENT® THE PERF</a>
<a title="JPM_Summer2021_25-4 page 2" href="http://viewer.zmags.com/publication/73f0d929?page=2"> Enhanc master invest Delive n Maste Co rI r e</a>
<a title="JPM_Summer2021_25-4 page 3" href="http://viewer.zmags.com/publication/73f0d929?page=3"> The Journal of Performance Measurement </a>
<a title="JPM_Summer2021_25-4 page 4" href="http://viewer.zmags.com/publication/73f0d929?page=4"> The Journal of Performance Measurement </a>
<a title="JPM_Summer2021_25-4 page 5" href="http://viewer.zmags.com/publication/73f0d929?page=5"> Stay on Course with Skilled Guidance </a>
<a title="JPM_Summer2021_25-4 page 6" href="http://viewer.zmags.com/publication/73f0d929?page=6"> Letter from the Editor The final issue of o</a>
<a title="JPM_Summer2021_25-4 page 7" href="http://viewer.zmags.com/publication/73f0d929?page=7"> Verified, but are you really compliant? If you'</a>
<a title="JPM_Summer2021_25-4 page 8" href="http://viewer.zmags.com/publication/73f0d929?page=8"> Letter from the Publisher A quarter century </a>
<a title="JPM_Summer2021_25-4 page 9" href="http://viewer.zmags.com/publication/73f0d929?page=9"> THE COLUMNISTS JPM asks six performance profe</a>
<a title="JPM_Summer2021_25-4 page 10" href="http://viewer.zmags.com/publication/73f0d929?page=10"> SHELLEY RUSSO If I was not working in performan</a>
<a title="JPM_Summer2021_25-4 page 11" href="http://viewer.zmags.com/publication/73f0d929?page=11"> </a>
<a title="JPM_Summer2021_25-4 page 12" href="http://viewer.zmags.com/publication/73f0d929?page=12"> What is a Performance Book of Record (PBOR), and </a>
<a title="JPM_Summer2021_25-4 page 13" href="http://viewer.zmags.com/publication/73f0d929?page=13"> we need to delineate between an Accounting Book o</a>
<a title="JPM_Summer2021_25-4 page 14" href="http://viewer.zmags.com/publication/73f0d929?page=14"> technology teams have worked together and traditi</a>
<a title="JPM_Summer2021_25-4 page 15" href="http://viewer.zmags.com/publication/73f0d929?page=15"> that support all these functions is the best desc</a>
<a title="JPM_Summer2021_25-4 page 16" href="http://viewer.zmags.com/publication/73f0d929?page=16"> because the complexities of enterprise data gover</a>
<a title="JPM_Summer2021_25-4 page 17" href="http://viewer.zmags.com/publication/73f0d929?page=17"> Is Your Asset Allocation Efficient? Unfortunatel</a>
<a title="JPM_Summer2021_25-4 page 18" href="http://viewer.zmags.com/publication/73f0d929?page=18"> Table 1 Market Assumptions Compound Return </a>
<a title="JPM_Summer2021_25-4 page 19" href="http://viewer.zmags.com/publication/73f0d929?page=19"> Table 3 concentrated mixes of a few assets with h</a>
<a title="JPM_Summer2021_25-4 page 20" href="http://viewer.zmags.com/publication/73f0d929?page=20"> Table 4 Table 5 that in Emerging Markets · </a>
<a title="JPM_Summer2021_25-4 page 21" href="http://viewer.zmags.com/publication/73f0d929?page=21"> Our starting point in this exercise was to outper</a>
<a title="JPM_Summer2021_25-4 page 22" href="http://viewer.zmags.com/publication/73f0d929?page=22"> Last, by using an optimizer, we can test the effi</a>
<a title="JPM_Summer2021_25-4 page 23" href="http://viewer.zmags.com/publication/73f0d929?page=23"> parable return with the least volatility: Next i</a>
<a title="JPM_Summer2021_25-4 page 24" href="http://viewer.zmags.com/publication/73f0d929?page=24"> parameters efficiently. We have “gotten our arms</a>
<a title="JPM_Summer2021_25-4 page 25" href="http://viewer.zmags.com/publication/73f0d929?page=25"> For the full podcast episode, The Journal Inter</a>
<a title="JPM_Summer2021_25-4 page 26" href="http://viewer.zmags.com/publication/73f0d929?page=26"> some Asset Owners in North America and other regi</a>
<a title="JPM_Summer2021_25-4 page 27" href="http://viewer.zmags.com/publication/73f0d929?page=27"> Another difference is the recommendation for asse</a>
<a title="JPM_Summer2021_25-4 page 28" href="http://viewer.zmags.com/publication/73f0d929?page=28"> ization doesn't have these in place, it really sh</a>
<a title="JPM_Summer2021_25-4 page 29" href="http://viewer.zmags.com/publication/73f0d929?page=29"> KT: It's great that you are saying verification i</a>
<a title="JPM_Summer2021_25-4 page 30" href="http://viewer.zmags.com/publication/73f0d929?page=30"> mate responsibility of claiming and maintaining c</a>
<a title="JPM_Summer2021_25-4 page 31" href="http://viewer.zmags.com/publication/73f0d929?page=31"> decisions who to manage your money, right? And ho</a>
<a title="JPM_Summer2021_25-4 page 32" href="http://viewer.zmags.com/publication/73f0d929?page=32"> Street can definitely help with the calculation s</a>
<a title="JPM_Summer2021_25-4 page 33" href="http://viewer.zmags.com/publication/73f0d929?page=33"> Risk-adjusted Performance Attribution: A Synthesi</a>
<a title="JPM_Summer2021_25-4 page 34" href="http://viewer.zmags.com/publication/73f0d929?page=34"> also benefit from understanding these different m</a>
<a title="JPM_Summer2021_25-4 page 35" href="http://viewer.zmags.com/publication/73f0d929?page=35"> able alpha. We will relax this assumption in oth</a>
<a title="JPM_Summer2021_25-4 page 36" href="http://viewer.zmags.com/publication/73f0d929?page=36"> Exhibit 2: Fama Risk-Adjust Return Model contrast</a>
<a title="JPM_Summer2021_25-4 page 37" href="http://viewer.zmags.com/publication/73f0d929?page=37"> Exhibit 4: Treynor Risk-Adjusted Return Model eva</a>
<a title="JPM_Summer2021_25-4 page 38" href="http://viewer.zmags.com/publication/73f0d929?page=38"> Exhibit 5: Comparing Beta and Treynor Models the </a>
<a title="JPM_Summer2021_25-4 page 39" href="http://viewer.zmags.com/publication/73f0d929?page=39"> Exhibit 6: M2 Model we are adjusting for more tha</a>
<a title="JPM_Summer2021_25-4 page 40" href="http://viewer.zmags.com/publication/73f0d929?page=40"> Exhibit 7: M2 Risk Adjusted Model Based on Sharpe</a>
<a title="JPM_Summer2021_25-4 page 41" href="http://viewer.zmags.com/publication/73f0d929?page=41"> justment for Fama and M2 are now the beta for the</a>
<a title="JPM_Summer2021_25-4 page 42" href="http://viewer.zmags.com/publication/73f0d929?page=42"> Exhibit 11: Sensitivity of Risk-Adjusted Return t</a>
<a title="JPM_Summer2021_25-4 page 43" href="http://viewer.zmags.com/publication/73f0d929?page=43"> risk adjustment for each model. But the slope and</a>
<a title="JPM_Summer2021_25-4 page 44" href="http://viewer.zmags.com/publication/73f0d929?page=44"> costless hedging whereas the other two (Treynor a</a>
<a title="JPM_Summer2021_25-4 page 45" href="http://viewer.zmags.com/publication/73f0d929?page=45"> Fisher and D'Alessandro (2019) model of adjusting</a>
<a title="JPM_Summer2021_25-4 page 46" href="http://viewer.zmags.com/publication/73f0d929?page=46"> Note that the allocation risk component is the we</a>
<a title="JPM_Summer2021_25-4 page 47" href="http://viewer.zmags.com/publication/73f0d929?page=47"> 1. The Fama and M2 models do not need to be chang</a>
<a title="JPM_Summer2021_25-4 page 48" href="http://viewer.zmags.com/publication/73f0d929?page=48"> these differences should help analysts choose the</a>
<a title="JPM_Summer2021_25-4 page 49" href="http://viewer.zmags.com/publication/73f0d929?page=49"> Investment Funds,” Harvard Business Review, vol. </a>
<a title="JPM_Summer2021_25-4 page 50" href="http://viewer.zmags.com/publication/73f0d929?page=50"> Investment Performance and the Money-Weighted Rat</a>
<a title="JPM_Summer2021_25-4 page 51" href="http://viewer.zmags.com/publication/73f0d929?page=51"> plex-valued ones. There are material effects base</a>
<a title="JPM_Summer2021_25-4 page 52" href="http://viewer.zmags.com/publication/73f0d929?page=52"> though not sufficient, condition for multiple eco</a>
<a title="JPM_Summer2021_25-4 page 53" href="http://viewer.zmags.com/publication/73f0d929?page=53"> Then we can write f in the canonical form for pol</a>
<a title="JPM_Summer2021_25-4 page 54" href="http://viewer.zmags.com/publication/73f0d929?page=54"> drawals (see Example 1 below). Using a financial</a>
<a title="JPM_Summer2021_25-4 page 55" href="http://viewer.zmags.com/publication/73f0d929?page=55"> Using the formula with V0 = 422, VT = 41, T = 8, </a>
<a title="JPM_Summer2021_25-4 page 56" href="http://viewer.zmags.com/publication/73f0d929?page=56"> Figure 2: Real-valued roots for the first sequenc</a>
<a title="JPM_Summer2021_25-4 page 57" href="http://viewer.zmags.com/publication/73f0d929?page=57"> Figure 3: Real-valued roots for the second sequen</a>
<a title="JPM_Summer2021_25-4 page 58" href="http://viewer.zmags.com/publication/73f0d929?page=58"> Figure 4: Real-valued roots for t</a>
<a title="JPM_Summer2021_25-4 page 59" href="http://viewer.zmags.com/publication/73f0d929?page=59"> Example 3A which is a representation of an invest</a>
<a title="JPM_Summer2021_25-4 page 60" href="http://viewer.zmags.com/publication/73f0d929?page=60"> made (lost18) money, and one or more negative MWR</a>
<a title="JPM_Summer2021_25-4 page 61" href="http://viewer.zmags.com/publication/73f0d929?page=61"> paper has annual cash flow data on the NYSE/AMEX </a>
<a title="JPM_Summer2021_25-4 page 62" href="http://viewer.zmags.com/publication/73f0d929?page=62"> real roots are not at all uncommon – they range f</a>
<a title="JPM_Summer2021_25-4 page 63" href="http://viewer.zmags.com/publication/73f0d929?page=63"> real, and while perturbations, within limits, may</a>
<a title="JPM_Summer2021_25-4 page 64" href="http://viewer.zmags.com/publication/73f0d929?page=64"> Shestopaloff, Yuri, and Alexander Shestopaloff, 2</a>
<a title="JPM_Summer2021_25-4 page 65" href="http://viewer.zmags.com/publication/73f0d929?page=65"> lowing them often had the effect of making subseq</a>
<a title="JPM_Summer2021_25-4 page 66" href="http://viewer.zmags.com/publication/73f0d929?page=66"> Reformulating Ankrim's Risk-adjusted Performance </a>
<a title="JPM_Summer2021_25-4 page 67" href="http://viewer.zmags.com/publication/73f0d929?page=67"> rities within the asset classes. Due to interacti</a>
<a title="JPM_Summer2021_25-4 page 68" href="http://viewer.zmags.com/publication/73f0d929?page=68"> assumptions, the Single Index Model is used. The </a>
<a title="JPM_Summer2021_25-4 page 69" href="http://viewer.zmags.com/publication/73f0d929?page=69"> define the “true” market timing as covarian</a>
<a title="JPM_Summer2021_25-4 page 70" href="http://viewer.zmags.com/publication/73f0d929?page=70"> and putting these (2) results by using stochastic</a>
<a title="JPM_Summer2021_25-4 page 71" href="http://viewer.zmags.com/publication/73f0d929?page=71"> By transforming equation (3a) under an assumption</a>
<a title="JPM_Summer2021_25-4 page 72" href="http://viewer.zmags.com/publication/73f0d929?page=72"> Table </a>
<a title="JPM_Summer2021_25-4 page 73" href="http://viewer.zmags.com/publication/73f0d929?page=73"> assume a highly correlated performance with the c</a>
<a title="JPM_Summer2021_25-4 page 74" href="http://viewer.zmags.com/publication/73f0d929?page=74"> pendent and identically distributed returns. For </a>
<a title="JPM_Summer2021_25-4 page 75" href="http://viewer.zmags.com/publication/73f0d929?page=75"> Figure 3: Performance Attribution Components C 4</a>
<a title="JPM_Summer2021_25-4 page 76" href="http://viewer.zmags.com/publication/73f0d929?page=76"> Table 2: Average “Classic” Performance Attributio</a>
<a title="JPM_Summer2021_25-4 page 77" href="http://viewer.zmags.com/publication/73f0d929?page=77"> ager with no security selection skills but with t</a>
<a title="JPM_Summer2021_25-4 page 78" href="http://viewer.zmags.com/publication/73f0d929?page=78"> E[M~T]=E∑n(w~p,i-w~b,i)(β~b,i(~rb-rf))+ β </a>
<a title="JPM_Summer2021_25-4 page 79" href="http://viewer.zmags.com/publication/73f0d929?page=79"> nmE[w~b,iw~ip,j].E[~]nmCov[w~b,iw~ip,j,ε~j] ∑∑ </a>
<a title="JPM_Summer2021_25-4 page 80" href="http://viewer.zmags.com/publication/73f0d929?page=80"> Brinson, Gary P. and Nimrod Fachler, “Measuring N</a>
<a title="JPM_Summer2021_25-4 page 81" href="http://viewer.zmags.com/publication/73f0d929?page=81"> 2 It should be noted that, theoretically,</a>
<a title="JPM_Summer2021_25-4 page 82" href="http://viewer.zmags.com/publication/73f0d929?page=82"> and in September 2001 (DAX: -16.96%), one can rea</a>
<a title="JPM_Summer2021_25-4 page 83" href="http://viewer.zmags.com/publication/73f0d929?page=83"> The Journal of Performance Measurement - List of </a>
<a title="JPM_Summer2021_25-4 page 84" href="http://viewer.zmags.com/publication/73f0d929?page=84"> Separating the Impact of Portfolio Management Dec</a>
<a title="JPM_Summer2021_25-4 page 85" href="http://viewer.zmags.com/publication/73f0d929?page=85"> You've Chosen Your Investment Performance & Attri</a>
<a title="JPM_Summer2021_25-4 page 86" href="http://viewer.zmags.com/publication/73f0d929?page=86"> Linking Single Period Attribution Results Andrew </a>
<a title="JPM_Summer2021_25-4 page 87" href="http://viewer.zmags.com/publication/73f0d929?page=87"> Perspectives on Transaction-based Attribution Dam</a>
<a title="JPM_Summer2021_25-4 page 88" href="http://viewer.zmags.com/publication/73f0d929?page=88"> Nested Performance Attribution Jose G. Menchero, </a>
<a title="JPM_Summer2021_25-4 page 89" href="http://viewer.zmags.com/publication/73f0d929?page=89"> Fixed Income Performance Attribution: A Flexible </a>
<a title="JPM_Summer2021_25-4 page 90" href="http://viewer.zmags.com/publication/73f0d929?page=90"> Transaction-based Performance: a Framework for Ev</a>
<a title="JPM_Summer2021_25-4 page 91" href="http://viewer.zmags.com/publication/73f0d929?page=91"> Performance Measurement and Attribution with Leve</a>
<a title="JPM_Summer2021_25-4 page 92" href="http://viewer.zmags.com/publication/73f0d929?page=92"> A Case for Arithmetic Attribution Mark R. David, </a>
<a title="JPM_Summer2021_25-4 page 93" href="http://viewer.zmags.com/publication/73f0d929?page=93"> The Associative Property of Attribution Linking Y</a>
<a title="JPM_Summer2021_25-4 page 94" href="http://viewer.zmags.com/publication/73f0d929?page=94"> Performance Attribution for Passive Strategies Da</a>
<a title="JPM_Summer2021_25-4 page 95" href="http://viewer.zmags.com/publication/73f0d929?page=95"> The Next Step in the Evolution of Decision-based </a>
<a title="JPM_Summer2021_25-4 page 96" href="http://viewer.zmags.com/publication/73f0d929?page=96"> Benchmark Rebalancing Calculations Damien Laker, </a>
<a title="JPM_Summer2021_25-4 page 97" href="http://viewer.zmags.com/publication/73f0d929?page=97"> A Modest Proposal to Modernize the Performance Ev</a>
<a title="JPM_Summer2021_25-4 page 98" href="http://viewer.zmags.com/publication/73f0d929?page=98"> The Journal Interview Jack Treynor, Institute for</a>
<a title="JPM_Summer2021_25-4 page 99" href="http://viewer.zmags.com/publication/73f0d929?page=99"> The Journal Interview Stefan Illmer, Ph.D., Credi</a>
<a title="JPM_Summer2021_25-4 page 100" href="http://viewer.zmags.com/publication/73f0d929?page=100"> The Journal Interview Douglas S. Rogers, CTC Cons</a>
<a title="JPM_Summer2021_25-4 page 101" href="http://viewer.zmags.com/publication/73f0d929?page=101"> The Journal Interview Jose G. Menchero Ph.D., CFA</a>
<a title="JPM_Summer2021_25-4 page 102" href="http://viewer.zmags.com/publication/73f0d929?page=102"> The Journal Interview Rajiv Mathur, State Street </a>
<a title="JPM_Summer2021_25-4 page 103" href="http://viewer.zmags.com/publication/73f0d929?page=103"> The Journal Interview John D. Simpson, The Spauld</a>
<a title="JPM_Summer2021_25-4 page 104" href="http://viewer.zmags.com/publication/73f0d929?page=104"> The Journal Interview Elske van de Burgt, CFA, Or</a>
<a title="JPM_Summer2021_25-4 page 105" href="http://viewer.zmags.com/publication/73f0d929?page=105"> On the Robustness of Performance Measures in Fund</a>
<a title="JPM_Summer2021_25-4 page 106" href="http://viewer.zmags.com/publication/73f0d929?page=106"> Performance Verification Matt Forstenhausler, Ern</a>
<a title="JPM_Summer2021_25-4 page 107" href="http://viewer.zmags.com/publication/73f0d929?page=107"> The Impact of GIPS in the U.K. Simon Strong, TCA </a>
<a title="JPM_Summer2021_25-4 page 108" href="http://viewer.zmags.com/publication/73f0d929?page=108"> An Analysis of the Aggregate Method to Calculate </a>
<a title="JPM_Summer2021_25-4 page 109" href="http://viewer.zmags.com/publication/73f0d929?page=109"> The Euro: Its Impact on Measurement of Past and F</a>
<a title="JPM_Summer2021_25-4 page 110" href="http://viewer.zmags.com/publication/73f0d929?page=110"> A Consistent Linking Concept for Fast Calculation</a>
<a title="JPM_Summer2021_25-4 page 111" href="http://viewer.zmags.com/publication/73f0d929?page=111"> The Myth of GIPS- Money-weighted Returns for Clie</a>
<a title="JPM_Summer2021_25-4 page 112" href="http://viewer.zmags.com/publication/73f0d929?page=112"> A Method to Estimate Transaction Costs David D. S</a>
<a title="JPM_Summer2021_25-4 page 113" href="http://viewer.zmags.com/publication/73f0d929?page=113"> Estimating Beta When the CAPM is True Robert Ferg</a>
<a title="JPM_Summer2021_25-4 page 114" href="http://viewer.zmags.com/publication/73f0d929?page=114"> Pension Risk Budgeting: Something Old, Something </a>
<a title="JPM_Summer2021_25-4 page 115" href="http://viewer.zmags.com/publication/73f0d929?page=115"> Analysis of Ranking Factors for a Risk Averse Inv</a>
<a title="JPM_Summer2021_25-4 page 116" href="http://viewer.zmags.com/publication/73f0d929?page=116"> Refining Core-Satellite Investing Ronald J. Surz,</a>
<a title="JPM_Summer2021_25-4 page 117" href="http://viewer.zmags.com/publication/73f0d929?page=117"> Measuring Risk for Venture Capital and Buyout Por</a>
<a title="JPM_Summer2021_25-4 page 118" href="http://viewer.zmags.com/publication/73f0d929?page=118"> Combining Approaches of Analysis: The Integrated </a>
<a title="JPM_Summer2021_25-4 page 119" href="http://viewer.zmags.com/publication/73f0d929?page=119"> The Time Contradiction (in Asset Management and A</a>
<a title="JPM_Summer2021_25-4 page 120" href="http://viewer.zmags.com/publication/73f0d929?page=120"> An Integrated Framework for Style Analysis and Pe</a>
<a title="JPM_Summer2021_25-4 page 121" href="http://viewer.zmags.com/publication/73f0d929?page=121"> Performance Measurement Technology Survey- Summar</a>
<a title="JPM_Summer2021_25-4 page 122" href="http://viewer.zmags.com/publication/73f0d929?page=122"> Selecting and Implementing a Daily Performance Sy</a>
<a title="JPM_Summer2021_25-4 page 123" href="http://viewer.zmags.com/publication/73f0d929?page=123"> Another Interpretation of Negative Sharpe Ratio Y</a>
<a title="JPM_Summer2021_25-4 page 124" href="http://viewer.zmags.com/publication/73f0d929?page=124"> Performance Measurement for Pension Funds Auke Pl</a>
<a title="JPM_Summer2021_25-4 page 125" href="http://viewer.zmags.com/publication/73f0d929?page=125"> The Journal of Performance Measurement Manuscript</a>
<a title="JPM_Summer2021_25-4 page 126" href="http://viewer.zmags.com/publication/73f0d929?page=126"> Train Your Entire Performance Staff for HALF PRIC</a>