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What are the three types of performance measure for a portfolio? Include Comparisons between the three.
What are the three types of performance measure for a portfolio? Include Comparisons between the three.
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Three common types of performance measures for a portfolio are Absolute returns This is the simplest measure of portfolio performance and is calculated by subtracting the initial portfolio value from the final portfolio value Absolute returns provide a straightforward indication of how much a portfolio has gained or lost over time However they do not consider the level of risk involved in achieving those returns Relative returns Relative returns compare the performance of a portfolio to a benchmark such as a market index This allows investors to assess how well their portfolio has performed relative to the overall market Relative returns are often expressed as a percentage with a positive number indicating that the portfolio has outperformed the benchmark and a negative number indicating that it has underperformed Riskadjusted returns Riskadjusted returns take into account both the return and risk of a portfolio They are considered a more comprehensive measure of portfolio performance than absolute or relative returns as they provide a more holistic view of how well a portfolio has compensated investors for the level of risk they have taken on Comparison of the three types of performance measures Comparison of the three types of performance measures FeatureAbsolute returnsRelative returnsRiskadjusted returns SimplicityMost straightforwardSimple to understandMore complex to calculate ...
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Management Accounting Information for Decision-Making and Strategy Execution
Authors: Anthony A. Atkinson, Robert S. Kaplan, Ella Mae Matsumura, S. Mark Young
6th Edition
137024975, 978-0137024971
