25 years: Investment management
It is important to have metrics that will tell us if there’s any relationship between the conviction we put in a strategy and the level of performance we get from it. In this video, Ali continues looking at the various metrics assessing behavioural patterns.
It is important to have metrics that will tell us if there’s any relationship between the conviction we put in a strategy and the level of performance we get from it. In this video, Ali continues looking at the various metrics assessing behavioural patterns.
10 mins 17 secs
Going through each step of a portfolio manager investment process and having a specific measure to assess the quality of the decision taken, would allow a portfolio manager or an investor to pinpoint the area of improvement and to design a clear route to achieve it.
Key learning objectives:
What metric can we use to assess a behaviour drift?
What is the objective of analysing the timing of decisions?
What are the benefits in assessing timing decisions?
The level of weight we put in a trade. It assumes that the more conviction we have in a strategy, the more weight we put into it. The weights are separated into four brackets.
To investigate this, we can monitor the evolution of some metrics, an obvious example of which is how long we have been holding the position since the last decision. It is important to mention that a change of investment strategy is normal and is a rather healthy way to adjust to changing market conditions. A drift is not necessarily good or bad.
Each portfolio manager will have a different timing profile depending on their area of focus, their investment process, and the market they are in.
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