No. of Recommendations: 2
Say you've been running an MI portfolio in a separate account for a while. What's a good definition and metric of success? Risk-adjusted return compared to a benchmark is the most important metric. But end-to-end performance only provides one data point. Smaller time periods provide more data, but will have more noise. I use monthly excess returns, and a chart of the 12-month average shows any changes in performance. Using independent monthly returns allows the use of standard statistical methods. For example, for the standard MI SIP screens, monthly excess return was:
avg sd from to months
1.0% 3.2% 19970224 20100701 161
-0.3% 2.5% 20100802 20231206 161
Using 6-month rolling returns is probably similar, but I would be more interested in the chart than percent wins.
