Portfolio Performance Measures

Exam Weight: ~3 questions (2% of exam)

Understanding how to measure investment performance matters for evaluating portfolios and making informed recommendations. This unit covers the various return calculations, current yield and bond yield relationships, and the benchmarks advisers use to assess and compare investment results.

What You'll Learn

• Current yield for bonds and stocks, the bond yield hierarchy, and price-yield relationships at discount, par, and premium
• Common equity and fixed-income benchmarks, benchmark types, selection criteria, and how benchmark choice determines alpha
• Ten return measures: risk-adjusted (Sharpe Ratio, Alpha), time-weighted, dollar-weighted, annualized, total, holding period, internal rate of return (IRR), expected, inflation-adjusted, and after-tax