Chapter 9 - Measuring Investment
Performance The Concept of Returns
questions with answers.
Returns ANS -The standard way to quantify investment performance
How well is the investment doing for the investor?
Investors typically quantify measures of return by looking backward or forward in time
Ex Post ANS -Return looking back in time (realized, historical) used to measure past performance, which
is useful for:
- Estimating future performance
- Judging past performance of investment managers/advisors
- Understanding the current investment environment, as it is a product of recent past experiences
Ex Ante ANS -Return looking forward in time (expected) used to measure future investment projections
Periodic Returns ANS -Usually quantified as simple holding period returns (HPR), measure what the
investment grows to within each single period of time - assuming that all cash flow (or asset valuation)
occurs only at the beginning and end of the period of time (no intermediate cash flows)
Periodic returns are measured separately over each of a sequence of regular and consecutive periods of
time
Periodic returns can be averaged over time to determine the time weighted return (TWR)
Multiperiod Returns ANS -Return number for a relatively long period of time during which there can be
cash flows into or out of the investment at immediate points in time
Performance The Concept of Returns
questions with answers.
Returns ANS -The standard way to quantify investment performance
How well is the investment doing for the investor?
Investors typically quantify measures of return by looking backward or forward in time
Ex Post ANS -Return looking back in time (realized, historical) used to measure past performance, which
is useful for:
- Estimating future performance
- Judging past performance of investment managers/advisors
- Understanding the current investment environment, as it is a product of recent past experiences
Ex Ante ANS -Return looking forward in time (expected) used to measure future investment projections
Periodic Returns ANS -Usually quantified as simple holding period returns (HPR), measure what the
investment grows to within each single period of time - assuming that all cash flow (or asset valuation)
occurs only at the beginning and end of the period of time (no intermediate cash flows)
Periodic returns are measured separately over each of a sequence of regular and consecutive periods of
time
Periodic returns can be averaged over time to determine the time weighted return (TWR)
Multiperiod Returns ANS -Return number for a relatively long period of time during which there can be
cash flows into or out of the investment at immediate points in time
