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Social ScienceConventional wisdom says that one should measure a manager’s investment performance over an entire market cycle. What arguments support this convention? What arguments contradict it?
Conventional wisdom says that one should measure a manager’s investment performance over
an entire market cycle. What arguments support this convention? What arguments contradict it?
Expert Answer
The arguments to support or contradict the convention are:
Support:
It is true that one should measure a manager’s investment performance over an entire market cycle. It is possible that the managers forecasting may be better in one circumstance and not in the other.
Measuring the performance of a manager over an entire market cycle increases the accuracy of the measure.
Example:
A manager who simply maintains high beta while choosing stocks will do better when the markets moves up and vice versa. Hence, it is required to monitor the performance of a manager...
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