Investment performance measurement concepts and methodologies have been developed for decades.
For any problem we are facing now, there is highly possible that some smart guy had a solution ready there.
It is 2018 now, we have enormous of portfolio analytics systems in the market that have various level of capabilities.
These market players have implemented selective methodologies within their systems and push to their clients.
The complexity of these systems have increased may not because of expansion of the building block of the investment
performance toolbox, but because of the complexity of market and evolution of technology. Regulations are tighten,
companies wants more centralized system to help them dealing with regulators. While industry is focusing on the systems,
there are still fundamental concepts are still debatable for application.
Two performance giants are having discussion on the following topics this year :
Time- vs. Money-weighting
Excess returns: arithmetic vs. geometric
The interaction effect: is there any point?
Attribution: arithmetic vs. geometric attribution
Holdings vs. transaction-based attribution?
Are residuals acceptable in attribution?
Is there any reason to measure ex-post risk?
What to use for the risk-free rate? What if it’s negative?
Risk-adjusted returns: what’s the best approach?
Is it time for risk-adjusted attribution?
Why pay so much for market indexes?
Should GIPS apply to retail funds?
Equal-weighted vs. asset-weighted standard deviation
Asset-weighted vs. equal-weighted composite returns: which is better?
Shall we follow? Check link here for more information.
The fragilista ... He is often involved in a strange ritual, something commonly called "a meeting." ...
he defaults to thinking that what he doesn't see is not there, or what he does not understand does not exist.
At the core, he tends to mistake the unknown for the nonexistent.
Aaron Swarz's analog on how our mind perform thinking :
your brain puts up a sort of mental force field around a task. Ever play with two magnets? If
you orient the magnets properly and try to push them towards each other, they'll repel fiercely.
As you move them around, you can sort of feel out the edges of the magnetic field. And as you try
to bring the magnets together, the field will push you back or off in another direction.
Accepting an opposite opinion can be hard for anyone because of our build-in attribute of
gene. When we hear an opinion, we may quickly response: "Oh, that is your opinion". That should
not be the right way for immediate response. Instead, we shall focus on whether their opinions are better or worse so that
we can examine our own ideas and thinking problems from different angles. That is how we learn and correct our thoughts.