tag:blogger.com,1999:blog-2568941354104807757.post1916642865716569675..comments2023-10-05T09:07:24.225-04:00Comments on Investment Performance Guy: Learning to take the good with the badDave Spauldinghttp://www.blogger.com/profile/01777929408680234896noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-2568941354104807757.post-85557636732511085492013-06-06T06:25:36.046-04:002013-06-06T06:25:36.046-04:00Steve, thanks for your input.
Interesting that y...Steve, thanks for your input. <br /><br />Interesting that you cite the "efficient frontier." Who came up with that concept? Wasn't it an academic? <br /><br />While I was merely praising the wording, I must also confess some degree of admiration for risk-adjusted return measures (my favorite being, of course, M-squared). <br /><br />If one looks at risks and returns separately, it's difficult to judge a manager vs. his/her benchmark. But, by "synthesizing" them, we have a metric that leads itself to easy comparison. <br /><br />From your note it appears you don't like Sharpe ratios, Information Ratios, etc. That is fine, and as a practitioner, you would know better than I as to their true value. But, the industry (not just academia) has embraced these measures. And again, my praise was for the elegant way of describing what occurs. Dave Spauldinghttps://www.blogger.com/profile/01777929408680234896noreply@blogger.comtag:blogger.com,1999:blog-2568941354104807757.post-27520846371839871182013-06-06T06:20:38.813-04:002013-06-06T06:20:38.813-04:00FROM STEVE CAMPISI:
"When things don't ma...FROM STEVE CAMPISI:<br />"When things don't make sense?" I think that's why they invented "interpretation" and "explanation." I disagree heartily and vigorously (a la Johnny Depp's "Hatter" in "Alice in Wonderland) with the idea that it's a good thing for risk and return to be synthesized into a single number. It's NOT a good thing, especially when it leads to people spouting numbers without much thought. No, I think that this is one of they biggest problems with what masquerades as performance "analysis" these days - analysts calculate something according to a stock formula and then make declarations on little more than whether one number is bigger than the other. At best, these ratios and such are merely starting points. There is no substitute for a well-trained performance analyst who understands the investment process and can explain the various numbers in a credible and representative context. We have precious little of that these days.<br /><br />Here's a painfully simple example: how many people look at the various points along the efficient frontier and puzzle over why the Sharpe ratios get "worse" as the level of return increases? Or who puzzle over whether the absolute number of an Information Ratio has any explanatory value? (Hint: it does!) We need less academics and calculations and more understanding of basic investment principles. Time much better spent.Dave Spauldinghttps://www.blogger.com/profile/01777929408680234896noreply@blogger.com