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Returns-based style analysis (RBSA) is a statistical technique used in finance to deconstruct the returns of investment strategies using a variety of explanatory variables. The model results in a strategy's exposures to asset classes or other factors, interpreted as a measure of a fund or portfolio manager's investment style .
Performance attribution, or investment performance attribution is a set of techniques that performance analysts use to explain why a portfolio's performance differed from the benchmark. This difference between the portfolio return and the benchmark return is known as the active return .
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There are two basic approaches that can be used: bottom up analysis and top down analysis. [2] These terms are used to distinguish such analysis from other types of investment analysis, such as quantitative and technical. Fundamental analysis is performed on historical and present data, but with the goal of making financial forecasts. There are ...
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Example investment portfolio with a diverse asset allocation. Asset allocation is the implementation of an investment strategy that attempts to balance risk versus reward by adjusting the percentage of each asset in an investment portfolio according to the investor's risk tolerance, goals and investment time frame. [1]
Modern portfolio theory is inconsistent with main axioms of rational choice theory, most notably with monotonicity axiom, stating that, if investing into portfolio X will, with probability one, return more money than investing into portfolio Y, then a rational investor should prefer X to Y.
The dividend discount model does not include projected cash flow from the sale of the stock at the end of the investment time horizon. A related approach, known as a discounted cash flow analysis, can be used to calculate the intrinsic value of a stock including both expected future dividends and the expected sale price at the end of the ...