Investment Risk and Return
Investment Risk and Return | Definition
A software module that provides a set of commonly used statistical measures for the analysis of portfolio returns. These statistical measures include various summary measures for risk and return. The return measures include arithmetic average returns, geometric average returns and compound returns over a user selected window. They are displayed in absolute returns and excess returns. The risk measures include standard deviation of returns as well as downside semi-variance and standard deviation. Also provided are risk adjusted returns and various risk/return ratios such as the Sharpe ratio, Sortino ratio, Treynor ratio, Jensen alpha, and the appraisal ratio. Other useful statistics include residual risk, coefficient of determination, upside and downside beta and the Merton-Henriksson test for market timing ability.RSC's risk/return statistics are grouped and displayed in several different reports and graphs, including a scatter plot of the portfolio return versus a chosen benchmark and the time series of specific risk residuals. The system offers a variety of market benchmarks and risk-free rates. The comprehensive risk/return statistics provides a thorough understanding of the nature of the historical returns of the portfolio.
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