Evaluating an Investment Manager in an Uncertain World
12 Pages Posted: 6 Jul 2012
Date Written: January 1, 2012
When an investment board hires a manager, it has beliefs about the future performance that the manager will generate. Typically, the manager is given three years to do its job. The investor then reviews it in light of the performance that it generated. In this technical paper, we formulate a method that enables an investor to perform such a review. In doing so, we reveal some profound issues with many of the prevailing conventions of performance evaluation.
Keywords: Fund managers, Performance evaluation, Investment performance, Bayesian statistics
JEL Classification: G31, G11
Suggested Citation: Suggested Citation