High Frequency Performance Monitoring

Posted: 18 Apr 2002

See all articles by Elroy Dimson

Elroy Dimson

University of Cambridge - Judge Business School; London Business School; European Corporate Governance Institute (ECGI)

Andrew Jackson

Vinva Investment Management; London Business School

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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 focusing 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.

Note: This is a description of the paper and not the actual abstract.

Keywords: Performance measurement, Investment management, High frequency monitoring

JEL Classification: G23, G10

Suggested Citation

Dimson, Elroy and Jackson, Andrew, High Frequency Performance Monitoring. Available at SSRN: https://ssrn.com/abstract=297736

Elroy Dimson (Contact Author)

University of Cambridge - Judge Business School ( email )

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London Business School ( email )

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European Corporate Governance Institute (ECGI) ( email )

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Andrew Jackson

Vinva Investment Management ( email )

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Sydney, 2000

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

London Business School ( email )

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

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