Interpret Portfolio Performance
Series 65 · Flashcards
SERIES 65 · FLASHCARDS
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QUESTION
Identify the required condition on portfolio weights
w
i
w_i
w
i
in
r
p
=
∑
w
i
r
i
r_p=\sum w_i r_i
r
p
=
∑
w
i
r
i
.
QUESTION
Calculate Sharpe ratio:
r
p
=
0.10
r_p=0.10
r
p
=
0.10
,
r
f
=
0.02
r_f=0.02
r
f
=
0.02
,
σ
p
=
0.16
\sigma_p=0.16
σ
p
=
0.16
. What is Sharpe?
QUESTION
What is the formula for time-weighted return (TWR) across
n
n
n
subperiods?
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ANSWER
TWR
=
(
∏
t
=
1
n
(
1
+
r
t
)
)
−
1
\text{TWR}=\left(\prod_{t=1}^{n}(1+r_t)\right)-1
TWR
=
(
∏
t
=
1
n
(
1
+
r
t
)
)
−
1
. Compounds subperiod returns to measure performance independent of external cash flows.
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