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Performance measurement

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Definition of Performance measurement

Performance Measurement Image 1

Performance measurement

The calculation of the return realized by a money manager over some time interval.



Related Terms:

Balanced Scorecard

A system of non-financial performance measurement that links innovation, customer and process measures to financial performance.


performance management system

a system reflecting the entire package of decisions regarding performance measurement and evaluation


Total return

In performance measurement, the actual rate of return realized over some evaluation period. In
fixed income analysis, the potential return that considers all three sources of return (coupon interest, interest
on interest, and any capital gain/loss) over some i nvestment horizon.


BARRA's performance analysis (PERFAN)

A method developed by BARRA, a consulting firm in
Berkeley, Calif. It is commonly used by institutional investors applying performance attribution analysis to
evaluate their money managers' performances.


Committee, AIMR Performance Presentation Standards Implementation Committee

The Association for Investment Management and Research (AIMR)'s performance Presentation Standards Implementation
Committee is charged with the responsibility to interpret, revise and update the AIMR performance
Presentation Standards (AIMR-PPS(TM)) for portfolio performance presentations.



Measurement error

Errors in measuring an explanatory variable in a regression that leads to biases in
estimated parameters.


Performance attribution analysis

The decomposition of a money manager's performance results to explain
the reasons why those results were achieved. This analysis seeks to answer the following questions: (1) What
were the major sources of added value? (2) Was short-term factor timing statistically significant? (3) Was
market timing statistically significant? And (4), Was security selection statistically significant?


Performance Measurement Image 2

Performance evaluation

The evaluation of a manager's performance which involves, first, determining
whether the money manager added value by outperforming the established benchmark (performance
measurement) and, second, determining how the money manager achieved the calculated return (performance
attribution analysis).


performance evaluation

the process of determining the degree
of success in accomplishing a task; it equates to both
effectiveness and efficiency


Performance shares

Shares of stock given to managers on the basis of performance as measured by earnings
per share and similar criteria. A control device used by shareholders to tie management to the self-interest of
shareholders.


physical measurement allocation

a method of allocating a joint cost to products that uses a common physical characteristic as the proration base


balanced scorecard (BSC)

an approach to performance
measurement that weighs performance measures from four
perspectives: financial performance, an internal business
perspective, a customer perspective, and an innovation and
learning perspective



 

 

 

 

 

 

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