Portfolio Performance Evaluation

Exactly evaluating and analyzing the expected return and risk is the key of performance evaluation of portfolio. Considering of return and risk of portfolio, there are several primary methods now such as the single index based on the Mean-Variance standard and the Capital Asset Prices Model (including Treynor ratio, Sharpe ratio and Jensen index), the components of risky return, the information ratio, the same risk-adjusted performance (including M-2 and M-3), the probability of decay rate, dynamic adjustment of performance and the method of performance evaluation of portfolio based on the "downside risk", etc. (all the foregoing methods are called traditional methods in following text). Though these methods can be used to evaluate the performance of portfolio from different angles and are widely accepted and adopted by investors, there exist still some problems have not been solved satisfactorily suchas the validity of the Capital Asset Prices Model, the election of reference portfolio, theconfirmation of risk-free return, the shortage of adopting historical data and how to distinguish the skill from luck of portfolio-manager, etc.After studying the modern portfolio theory and the traditional methods of performance evaluation of portfolio, this paper chooses valid portfolio on the mean-variance efficient frontier as the reference portfolio and defines the relative index, the distance-index and the utility-index of performance evaluation of portfolio which is based on the mean-variance efficient frontier. The paper also studies the methods of performance evaluation of portfolio by using multiple objective decision analysis, and studies the performance evaluation of funds.This paper uses demonstration analysis approach to analyze the methods of performance evaluation of portfolio based on the mean-variance efficient frontier. The result of demonstration analysis proves that the methods of performance evaluation of portfolio based on the mean-variance efficient frontier are very useful.This paper acquires the following achievements:(1) This paper extends the system of methods of performance evaluation of portfolio.(2) An algorithm for performance evaluation of portfolio based on the mean-variance efficient frontier is proposed in this paper;(3)This paper also studies the algorithm of using multiple objective decision analysis to analyze indices of performance evaluation of portfolio...