In the investment industry, performance evaluation refers to the measurement, attribution, and appraisal of investment results. In particular, performance evaluation provides information about the return and risk of investment portfolios over specified investment period(s).
By providing accurate data and analysis on investment decisions and their consequences, performance evaluation allows portfolio managers to take corrective measures to improve investment decision-making and management processes.
Performance evaluation information helps in understanding and controlling investment risk and should, therefore, lead to improved risk management.
The Sharpe Ratio
The Treynor Ratio
M2: Risk-Adjusted Performance (RAP)
M2 provides a measure of portfolio return that is adjusted for the total risk of the portfolio relative to that of some benchmark.
Jensen’s Alpha
