High Frequency Performance Monitoring

30 Pages Posted: 11 Aug 2001  

Elroy Dimson

University of Cambridge - Judge Business School; London Business School

Andrew Jackson

Vinva Investment Management; London Business School

Multiple version iconThere are 2 versions of this paper

Date Written: April 2001

Abstract

Improvements in technology and increasing emphasis on performance have led many investors to monitor the performance of fund managers on a high frequency basis: quarterly, monthly, or more often. We examine the impact that frequency of performance measurement has on the probability distribution of observed outcomes. With more frequent monitoring of rolling returns, there is a greatly increased probability of observing seemingly extreme results. We show that if performance is appraised by focussing on returns to date, then it is important to adjust the definition of extreme performance for the frequency with which returns are monitored. Failure to do so may lead to costly actions such as strategy revisions or manager terminations, which increase transaction costs and have detrimental effects on manager incentives.

Keywords: Performance measurement; Investment management; High frequency monitoring

JEL Classification: G23, G10

Suggested Citation

Dimson, Elroy and Jackson, Andrew, High Frequency Performance Monitoring (April 2001). London Business School Accounting Subject Area No. 024. Available at SSRN: https://ssrn.com/abstract=274330 or http://dx.doi.org/10.2139/ssrn.274330

Elroy Dimson (Contact Author)

University of Cambridge - Judge Business School ( email )

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Cambridge, CB2 1AG
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London Business School ( email )

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London, NW1 4SA
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44 700 607 7390 (Fax)

Andrew Jackson

Vinva Investment Management ( email )

L13 10 Bridge Street
Sydney, 2000
Australia

HOME PAGE: http://www.vinva.com

London Business School ( email )

Sussex Place
Regent's Park
London NW1 4SA
United Kingdom

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