Evaluating an Investment Manager in an Uncertain World

12 Pages Posted: 6 Jul 2012

Date Written: January 1, 2012

Abstract

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

Penfold, Robin, Evaluating an Investment Manager in an Uncertain World (January 1, 2012). Towers Watson Technical Paper No. 2101771. Available at SSRN: https://ssrn.com/abstract=2101771 or http://dx.doi.org/10.2139/ssrn.2101771

Robin Penfold (Contact Author)

Towers Watson ( email )

Watson House
London Road
Reigate, Surrey, RH2 9PQ
United Kingdom

HOME PAGE: http://bit.ly/Q45kyi

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