Measuring Return and Risk

Frank J. Fabozzi and Francesco A. Fabozzi

Chapter 7 in Fundamentals of Institutional Asset Management, 2020, pp 171-204 from World Scientific Publishing Co. Pte. Ltd.

Abstract: In evaluating performance of an asset manager, an investment strategy, or an investment vehicle, the first step is to calculate the actual return realized. Several methodologies for computing the actual return are explained in this chapter. Performance evaluation must take into account the risks associated with any investment. Although we described the various types of risks in Chapter 2, in this chapter we will explain and illustrate several measures to quantify risk. A more detailed discussion of how these risk measures are calculated is provided in Chapter 8 of the companion book. Reward-risk ratios combine return (or reward) from an investment relative to its risk. Four reward-risk ratios are described at the end of this chapter.

Keywords: Investment Risks; Investment Vehicles; Portfolio Theory; Asset Pricing Theory; Mean-Variance Analysis; Measuring Return; Measuring Risk; Company Equity Analysis; Equity Valuation Models; Common Stock Alpha Strategies; Common Stock Beta Strategies; Smart Beta Strategies; Factor Investing; Equity Indexing; Equity Derivatives; Bond Analytics; Bond Pricing; Interest Rate Risk; Duration; Interest Rate Derivatives; Credit Derivatives; Multi-Asset Portfolio Strategies; Collective Investment Vehicles; Alternative Assets (search for similar items in EconPapers)
JEL-codes: G1 G11 G3 G30 (search for similar items in EconPapers)
Date: 2020
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