New portfolio performance measures reveal hidden risks in investment funds.
The article reviews methods for measuring portfolio performance and the evidence on professionally managed investment portfolios. Traditional measures developed before 1990 have limitations, so newer techniques like Conditional Performance Evaluation have been introduced to address these issues. These new measures consider expected returns and risks that change over time, improving on the older methods. Evidence from various types of investment funds shows that these newer measures have shed light on the selectivity and market timing abilities of professional managers.