Portfolio Performance Evaluation参考.ppt

CHAPTER 24 Portfolio Performance Evaluation CHAPTER 25 International Diversification Average Country-Index Returns and Capital Asset Pricing Theory Figure 25.5 shows a clear advantage to investing in emerging markets. Results are consistent with risk ranking by standard deviation, but not with ranking by beta. Beta rankings may fail because of home-country bias, which dominates international investing. Correlations between countries suggest international diversification is beneficial, especially for active investors. Globalization may have caused higher cross-country correlations. It’s possible to expand the efficient frontier some. It’s possible to reduce the systematic risk level below the domestic only level. Benefits from International Diversification Figure 25.6 International Diversification Figure 25.8 Efficient Frontier of Country Portfolios Are Benefits Preserved in Bear Markets? Correlations between countries may increase in a crisis. Roll’s model suggests a common factor underlying the movement of stocks around the world. Prediction: Diversification only protects against country-specific events. What happened in 1987? In 2008? Figure 25.9 Regional Indexes around the Crash, October 14–October 26, 1987 Figure 25.10 Beta and SD of Portfolios Three Rules of Thumb To passively diversify your portfolio, include country indexes in order of: Market capitalization (from high to low) Beta against the U.S. (from low to high) Country index standard deviation (from high to low) Figure 25.11 Risks and rewards of international portfolios, 2000–2009 Performance Attribution The EAFE index is a commonly used benchmark for portfolio performance. Measure the contribution of: Currency selection Country selection Stock selection Cash/bond selection Table 25.15 Example of Performance Attribution: International * * * * * * Figure 24.8 Average Tracking Error for 636 Mutual Funds, 1985-1989 Evaluating Performance Evaluation Performance evaluation has two key problems: Many obser