White papers/Case studies

Pain Index and Pain Ratio by Marc Odo CFA, CAIA, CFP

Date: 
Fri, 2011-04-08

In July of 2006, Zephyr Associates unveiled a new risk metric called the “pain index”. The pain index is meant to quantify the capital preservation characteristics of a fund, manager, index, or any other data series. In short, the pain index measures the 1) depth, 2) duration, and 3) frequency of losses experienced by a manager. Once established, the pain index can be utilized in a return vs. risk trade-off metric. The “pain ratio” compares the returns versus the loss characteristics using a well-known format.

The Alpha* Statistic by Thomas Becker, Ph.D.

Date: 
Fri, 2011-03-18

The α* statistic was introduced by Richard C. Marston in 2004 as a measure of risk-adjusted excess return. The idea of risk-adjusted excess return is based on the premise that comparing the return of a manager to that of a benchmark is inherently unfair. That is because the risk levels of the manager and the benchmark are almost always different.

CASE STUDY: Using Post-MPT Statistics to Detect Unrealistic Results by Marc Odo CFA, CAIA, CFP

Date: 
Thu, 2010-12-30

This paper proposes that the standard set of analytical metrics used in the finance industry did not adequately expose just how preposterous the return series claimed by Bernie Madoff actually was.  However, using Zephyr StyleADVISOR’s newer metrics and graphs focusing on tail risk and capital preservation, the intelligent and diligent analyst would have noticed some disturbing results.

Target Date Funds and Returns-Based Style Analysis by Marc Odo CFA, CAIA, CFP

Date: 
Thu, 2010-12-30

In Spring of 2010, Zephyr Associates put forth the idea of using William Sharpe’s returns-based style analysis (RBSA) methodology as a valuable tool for analyzing target date funds.  While spelling out the case for using RBSA from an academic, theoretical perspective, Zephyr clients have since requested guidance in using the idea proposed in a real-world setting to compare the performances of two families of target date funds.   This follow-up paper illustrates how the analyst might use the RBSA ideas to these ends.

Optimizing Managers for Active Risk by Marc Odo CFA, CAIA, CFP

Date: 
Thu, 2010-10-14

This guide will walk you through the steps and rationale for using Zephyr’s AllocationADVISOR to optimize a collection of active managers. The optimization is a variation of Markowitz’s classic concept of Mean-Variance Optimization and the efficient frontier.

The Zephyr K-Ratio by Thomas Becker, Ph.D.

Date: 
Wed, 2010-10-13

In 1996, Lars Kestner introduced the K-Ratio as a complement to the Sharpe Ratio. With Version 8.1, Zephyr Associates makes the K-Ratio available to StyleADVISOR users. This article explains the use, the meaning, and the exact mathematical definition of the ratio.

Confidence Bands as an Advanced Monte Carlo Engine by Marc Odo, CFA, CAIA, CFP

Date: 
Fri, 2010-09-03

This guide will walk you through the steps and rationale for using Zephyr’s AllocationADVISOR’s “Confidence Bands” function.  In short, a Confidence Bands analysis runs a full Monte Carlo analysis for every single portfolio on the efficient frontier and tells the analyst which portfolios have the highest probability of meeting an investor’s goals.

Style Analysis: A Ten-Year Retrospective and Commentary by R. Stephen Hardy

Date: 
Tue, 2003-01-07

Style analysis, often referred to as returns-based style analysis (hereafter called RBSA), was developed and first introduced by William Sharpe in his landmark article, “Determining a Fund’s Effective Asset Mix.”1 In 1992, RBSA was made commercially available with the release of StyleADVISOR, a Windows-based software program designed to implement Sharpe’s style analysis. For much of its early history, RBSA was used by a small number of pension plan sponsors and institutional money managers.

The Omega Statistic Explained by Thomas Becker, Ph.D.

Date: 
Mon, 2010-04-05

The Omega measure was introduced in 2002 by C. Keating and B. Sedgewick ([1]) as a universal performance measure. This article explains the use, the meaning, and the exact mathematical definition of the Omega.

Target Date Funds by Marc Odo, CFA, CAIA, CFP

Date: 
Mon, 2010-04-05

Over the past several years the popularity of target date funds for use in retirement plans has exploded.  Their attractiveness is obvious:  faced with an overwhelming number of investment options in a self-directed 401(k) plan, an unsophisticated investor can instead direct all of his or her contributions to a single, well-diversified mutual fund.  While target date, lifestyle, or glide path funds have made investing easy for the plan participant, the irony is their introduction has made life harder, in some ways, for the fiduciaries whose job it is to analyze such invest

 
 

Informa Investment Solutions is part of the Business Intelligence Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC’s registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Informa