Russell 3000 – The index measures the performance of the largest 3000 US companies representing approximately 98% of the investable US equity market. It is market-capitalization weighted.
Russell 3000 Value – The index measures the performance of the broad value segment of US equity value universe. It includes Russell 3000 index companies with lower price-to-book ratios and lower forecasted growth values. It is market-capitalization weighted.
Russell 3000 Growth – The index measures the performance of the broad growth segment of the US equity universe. It includes Russell 3000 index companies with higher price-to-book ratios and higher forecasted growth values. It is market-capitalization weighted.
Russell 2500 – The index measures the performance of the small to mid-cap segment of the US equity universe. It is a subset of the Russell 3000 index includes approximately 2500 of the smallest securities based on the combination of their market cap and current index membership.
Russell 2000 – The index measures the performance of the small-cap segment of the US equity universe. It is a subset of the Russell 3000 and includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.
Russell 2000 Value – The index measures the performance of small-cap value segment of the US equity universe. It includes those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. It is market-capitalization weighted.
Russell 2000 Growth – The index measures the performance of small-cap growth segment of the US equity universe. It includes those Russell 2000 companies with higher price-to-value ratios and higher forecasted growth values. It is market-capitalization weighted.
Russell 1000 – The index measures the performance of the large-cap segment of the US equity securities. It is a subset of the Russell 3000 index and includes approximately 1000 of the largest securities based on a combination of their market cap and current index membership.
Russell 1000 Value – The index measures the performance of the large-cap value segment of the US equity securities. It includes the Russell 1000 index companies with lower price-to-book ratios and lower expected growth values. It is market-capitalization weighted.
Russell 1000 Growth – The index measures the performance of the large-cap growth segment of the US equity securities. It includes the Russell 1000 index companies with higher price-to-book ratios and higher forecasted growth values. It is market-capitalization weighted.
S&P 500 – The index measures the performance of 500 widely held stocks in US equity market. Standard and Poor’s chooses member companies for the index based on market size, liquidity and industry group representation. Included are the stocks of industrial, financial, utility, and transportation companies. Since mid-1989, this composition has been more flexible and the number of issues in each sector has varied. It is market-capitalization weighted.
MSCI ACWI ex USA – The index measures the performance of the large and mid-cap segments of the particular regions, excluding USA equity securities, including developed and emerging market. It is free float-adjusted market-capitalization weighted.
MSCI World ex USA – The index measures the performance of the large and mid-cap segments of world, excluding US equity securities. It is free float-adjusted market-capitalization weighted.
MSCI World ex USA Small Cap – The index measures the performance of small cap representation across 22 of 23 developed markets countries (excluding the United States). It covers approximately 14% of the free float-adjusted market capitalization in each country.
MSCI World ex USA Value – The Index captures large and mid-cap securities exhibiting overall value style characteristics across 22 of 23 Developed Markets countries. The value investment style characteristics for index construction are defined using three variables: book value to price, 12-month forward earnings to price and dividend yield.
MSCI World ex USA Growth – The Index captures large and mid-cap securities exhibiting overall growth style characteristics across 22 of 23 Developed Markets countries. The growth investment style characteristics for index construction are defined using five variables: long-term forward EPS growth rate, short-term forward EPS growth rate, current internal growth rate and long-term historical EPS growth trend and long-term historical sales per share growth trend.
MSCI Emerging Markets – The index measures the performance of the large and mid-cap segments of emerging market equity securities. It is free float-adjusted market-capitalization weighted.
MSCI Emerging Markets Small Cap – The index measures the performance of the small cap segments of emerging market equity securities, which tends to capture more local economic and sector characteristics relative to larger emerging markets capitalization segments. It is free float-adjusted market-capitalization weighted.
MSCI Emerging Markets Value – The index captures large and mid-cap securities exhibiting overall value characteristics across 24 Emerging Markets (EM) countries. The value investment style characteristics for index construction are defined using three variables: book value to price, 12-month forward earnings to price and dividend yield. With 541 constituents, the index targets 50% coverage of the free float-adjusted market capitalization of the MSCI EM Index.
MSCI Emerging Markets Growth – The index captures large and mid-cap securities exhibiting overall growth style characteristics across 24 Emerging Markets (EM) countries. The growth investment style characteristics for index construction are defined using five variables: long-term forward EPS growth rate, short-term forward EPS growth rate, current internal growth rate and long-term historical EPS growth trend and long-term historical sales per share growth trend.
MSCI EAFE – The index measures the performance of the large and mid-cap segments of developed markets, excluding the US & Canada equity securities. It is free float-adjusted market-capitalization weighted.
MSCI EAFE Growth – The index measures the performance of the growth large and mid-cap segments of equity securities in developed markets, excluding the US & Canada. It is free float-adjusted market-capitalization weighted.
MSCI EAFE Value – The index measures the performance of the value large and mid-cap segments of equity securities in developed markets, excluding the US & Canada. It is free float-adjusted market-capitalization weighted.
Bloomberg Global Aggregate Bond (unhedged to USD) – The index measures the performance of global investment grade fixed-rate debt markets, including the U.S. Aggregate, the Pan-European Aggregate, the Asian-Pacific Aggregate, Global Treasury, Eurodollar, Euro-Yen, Canadian, and Investment Grade 144A index-eligible securities.
Bloomberg US Aggregate Bond – The index measures the performance of investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS, and CMBS.
Bloomberg US Credit – The index measures the performance of the US Corporate and a non-corporate component that includes foreign agencies, sovereigns, supernationals and local authorities. It is a subset of the US Government/Credit Index and the US Aggregate Index.
Bloomberg US Government – The index measures the performance of the U.S. Treasury and U.S. Agency Indices, including Treasuries and U.S. agency debentures. It is a component of the U.S. Government/Credit Index and the U.S. Aggregate Index.
Bloomberg US Government 1-5 Year – The index measures the performance of US Treasuries and US Agency bonds with maturities of 1 (inclusive) to 5 (exclusive) years.
Bloomberg Municipal Bond – This index measures the performance of the Bloomberg U.S. Municipal bond, which covers the USD-denominated long-term tax exempt bond market with four main sectors: state and local general obligation bonds, revenue bonds, insured bonds and pre-refunded bonds.
Bloomberg Municipal Bond 3 Year (2-4 Yr) – The index measures the performance of USD-denominated long-term tax exempt bond market with maturities of 3 years(2-4), including state and local general obligation bonds, revenue bonds, insured bonds, and pre-refunded bonds.
ICE BofAML Three-Month US Treasury Bill – The index measures the performance of a single issue of outstanding treasury bill which matures closest to, but not beyond, three months from the rebalancing date. The issue is purchased at the beginning of the month and held for a full month; at the end of the month that issue is sold and rolled into a newly selected issue.
Bloomberg US Treasury TIPS – The index measures the performance of rules-based, market value-weighted inflation-protected securities issued by the U.S. Treasury. It is a subset of the Global Inflation-Linked Index (Series-L).
CSFB High Yield Index – The index measures the performance of investible universe of the $US-denominated high yield debt market, including cash-pay, zero-coupon, stepped-rate and pay-in-kind (PIK) bonds.
Dow Jones US Select REIT – The index measures the performance of publicly traded real estate investment trusts (REITs) and REIT-like securities. The index is a subset of the Dow Jones US Select Real Estate Securities Index (RESI). The index is designed to serve as proxy for direct real estate investment, in part by excluding companies whose performance may be driven by factors other than the value of real estate.
S&P Global ex US REIT – The index measures the performance of the global real estate market, excluding U.S. equities.
Bloomberg Commodity Total Return – The index measures the performance of future contracts on physical commodities which traded on US exchanges and London Metal Exchange. The commodity weightings are based on production and liquidity, subject to weighting restrictions applied annually.
S&P North American Natural Resources – The index measures the performance of US traded securities that are classified under the Global Industry Classification Standard (GICS) energy and materials (sector) excluding the chemicals (industry) and steel (sub-industry).
Barclays Capital Treasury Bond 1-5 Years – The index measures the performance of public obligations of the U.S. Treasury with maturities of one year to five years. It is market-capitalization weighted.
Barclays Intermediate Govt-Credit – The index measures the performance of publicly issued intermediate government and corporate debt securities with maturities of 1-10 years.
Barclays US Long Credit AA Bond – The index measures the performance of the long term sector of the United States investment bond market, which includes corporate debt and sovereign, supranational, local authority and non-U.S. agency bonds that are dollar denominated and have a remaining maturity of greater than or equal to 10 years. The index only includes bonds with a credit rating of AA.
Bloomberg 1-10 Year Municipal Blend – The index is a market value-weighted index which covers the short and intermediate components of the Bloomberg Municipal Bond Index—an unmanaged, market value-weighted index which covers the U.S. investment-grade tax-exempt bond market.
Bloomberg Treasury Bond 1-5 Years – The index measures the performance of public obligations of the U.S. Treasury with maturities of one year to five years. It is market-capitalization weighted.
Bloomberg Commodity – The index is composed of futures contracts and reflects the returns on a fully collateralized investment in the BCOM. This combines the returns of the BCOM with the returns on cash collateral invested in 13 week (3 Month) U.S. Treasury Bills.
BofAML US Treasury Bill 6 Mon TR USD – The index measures the performance of 6-month U.S. Treasury Bills.
Citigroup High Grade – (Also referred to as “FTSE Corporate Investment Grade (Treasury Rate-Hedged) Index”) – The index measures the performance of investment-grade corporate debt. The index consists of long position in investment-grade corporate bonds and a duration-matched short position in US Treasury bonds. Minimum rating is BBB- by S&P or Baa3 by Moody’s. It is market-capitalization weighted prior to applying any capping constraints for diversification.
Citigroup World Government Bond 1-5 Years – (see FTSE World Government Bond 1-5 Years Index below)
Consumer Price Index – The index represents the rate of inflation of U.S. consumer prices as determined by the U.S. Bureau of Labor Statistics. It is determined through a monthly survey of various consumer goods and services including, housing, food, fuel, transportation, & electricity, etc.CRSP 1-10 – The index measures the performance of the total US stock market, which it defines as the aggregate capitalization of all securities listed on the NYSE, AMEX, and NASDAQ exchanges.
CRSP 6-10 – The index measures the performance of US small cap stocks, those in the five smallest deciles of the US market.
Dimensional Emerging Markets – The index measures the performance of all securities in the eligible markets. It is market-capitalization weighted.
Dimensional Emerging Markets High Profitability – The index represents the average return of the three high-profitability subgroups of emerging markets companies. These subgroups are formed by sorting stocks into three profitability groups from high to low. Each group represents one-third of the market capitalization. Similarly, stocks are sorted into three relative price groups. The intersections of the three profitability groups and the three relative price groups yield nine subgroups formed on profitability and relative price.
Dimensional Emerging Markets Low Profitability – The index represents the average return of the three low-profitability subgroups of emerging markets companies. These subgroups are formed by sorting stocks into three profitability groups from high to low. Each group represents one-third of the market capitalization. Similarly, stocks are sorted into three relative price groups. The intersections of the three profitability groups and the three relative price groups yield nine subgroups formed on profitability and relative price.
Dimensional Emerging Markets Small Cap – The index represents small company securities in the eligible markets excluding those with the lowest profitability and highest relative price within the small cap universe. January 1989–December 1993: Fama/French Emerging Markets Small Cap Index. It is market-capitalization weighted.
Dimensional Emerging Markets Value – The index represents companies whose relative price is in the bottom 33% of their country’s companies after the exclusion of utilities and companies with either negative or missing relative price data. The index emphasizes companies with smaller capitalization, lower relative price, and higher profitability. The index also excludes those companies with the lowest profitability and highest relative price within their country’s value universe. Exclusions: REITs and investment companies. Prior to January 1994: Fama/French Emerging Markets Value Index.
Dimensional International High Profitability – The index represents the average return of the three high-profitability subgroups of non-US developed companies. These subgroups are formed by sorting stocks into three profitability groups from high to low. Each group represents one-third of the market capitalization. Similarly, stocks are sorted into three relative price groups. The intersections of the three profitability groups and the three relative price groups yield nine subgroups formed on profitability and relative price.
Dimensional International Low Profitability – The index represents the average return of the three low-profitability subgroups of non-US developed companies. These subgroups are formed by sorting stocks into three profitability groups from high to low. Each group represents one-third of the market capitalization. Similarly, stocks are sorted into three relative price groups. The intersections of the three profitability groups and the three relative price groups yield nine subgroups formed on profitability and relative price.
Dimensional International Small Cap – The index represents small company securities in non-US developed markets excluding those with the lowest profitability and highest relative price within the small cap universe. July 1981–December 1993: It Includes non-US developed securities in the bottom 10% of market capitalization in each eligible country. All securities are market-capitalization weighted. Each country is capped at 50%. Prior to July 1981, the index is 50% UK and 50% Japan. It is market-capitalization weighted.
Dimensional International Small Cap Value – The index represents non-US developed companies whose relative price is in the bottom 35% of their country’s respective constituents in the Dimensional International Small Cap Index after the exclusion of utilities and companies with either negative or missing relative price data. The index also excludes those companies with the lowest profitability within their country’s small value universe. Exclusions: REITs and investment companies. Prior to January 1994: Includes securities of MSCI EAFE countries in the top 30% of book-to-market by market capitalization conditional on the securities being in the bottom 10% of market capitalization, excluding the bottom 1%. All securities are market-capitalization weighted. Each country is capped at 50%. It is market-capitalization weighted.
Dimensional International Value – The index represents non-US developed companies whose relative price is in the bottom 33% of their country’s companies after the exclusion of utilities and companies with either negative or missing relative price data. The index emphasizes companies with smaller capitalization, lower relative price, and higher profitability. The index also excludes those companies with the lowest profitability and highest relative price within their country’s value universe. Exclusions: REITs and investment companies.
Dimensional Small Cap – The index measures the performance of U.S. small cap companies. Companies are eligible for inclusion if they have at least $100 million in market capitalization and are smaller than the 800th largest company.
Dimensional US High Profitability – The index represents the average return of the three high-profitability subgroups of US companies. These subgroups are formed by sorting stocks into three profitability groups from high to low. Each group represents one-third of the market capitalization. Similarly, stocks are sorted into three relative price groups. The intersections of the three profitability groups and the three relative price groups yield nine subgroups formed on profitability and relative price.
Dimensional US Large Cap Value – The index represents securities of US companies traded on the NYSE, NYSE MKT (formerly AMEX), and Nasdaq Global Market with market capitalizations above the 1,000th-largest company whose relative price is in the bottom 30% of the Dimensional US Large Cap Index after the exclusion of utilities, companies lacking financial data, and companies with negative relative price. The index emphasizes securities with higher profitability, lower relative price, and lower market capitalization. Exclusions: non-US companies, REITs, UITs, and investment companies. Prior to January 1975: Targets securities of US companies traded on the NYSE, NYSE MKT (formerly AMEX), and Nasdaq Global Market with market capitalizations above the 1,000th-largest company whose relative price is in the bottom 20% of the Dimensional US Large Cap Index after the exclusion of utilities, companies lacking financial data, and companies with negative relative price.
Dimensional US Low Profitability – The index represents the average return of the three low-profitability subgroups of US companies. These subgroups are formed by sorting stocks into three profitability groups from high to low. Each group represents one-third of the market capitalization. Similarly, stocks are sorted into three relative price groups. The intersections of the three profitability groups and the three relative price groups yield nine subgroups formed on profitability and relative price.
Dimensional US Small Cap – The index represents securities of the smallest US companies whose market capitalization falls in the lowest 8% of the total market capitalization of the eligible market. The eligible market is composed of securities of US companies traded on the NYSE, NYSE MKT (formerly AMEX), and Nasdaq Global Market. Exclusions: Non-US companies, REITs, UITs, and investment companies. From January 1975 to the present, the index also excludes companies with the lowest profitability and highest relative price within the small cap universe. It is market-capitalization weighted.
Dimensional US Small Cap Value – The index represents securities of US companies traded on the NYSE, NYSE MKT (formerly AMEX), and Nasdaq Global Market whose relative price is in the bottom 35% of the Dimensional US Small Cap Index after the exclusion of utilities, companies lacking financial data, and companies with negative relative price. The index emphasizes securities with higher profitability, lower relative price, and lower market capitalization. Exclusions: non-US companies, REITs, UITs, and investment companies. Prior to January 1975: Targets securities of US companies traded on the NYSE, NYSE MKT (formerly AMEX), and Nasdaq Global Market whose relative price is in the bottom 25% of the Dimensional US Small Cap Index after the exclusion of utilities, companies lacking financial data, and companies with negative relative price.
Fama/French Emerging Markets Value – The index measures the performance of the higher 30% in book-to-market of emerging markets securities. It is a simulated strategy of IFC investable universe countries. It is float-adjusted market-capitalization weighted.
Fama/French Emerging Markets Growth – The index measures the performance of the lower 30% in book-to-market of emerging markets securities. It is a simulated strategy of IFC investable universe countries. It is float-adjusted market-capitalization weighted.
Fama/French International Value – The index measures the performance of the higher 30% in book-to-market of international securities. It is a simulated strategy of MSCI EAFE + Canada countries.
Fama/French International Growth – The index measures the performance of the lower 30% in book-to-market of international securities. It is a simulated strategy of MSCI EAFE + Canada countries.
Fama/French Total US Market Research – The index measures the performance of all US operating companies trading on the NYSE, AMEX, or Nasdaq NMS. Excludes ADRs, Investment Companies, Tracking Stocks, non-US incorporated companies, Closed-end funds, Certificates, Shares of Beneficial Interests and Berkshire Hathaway Inc (Permco 540)
Fama/French US Growth Research – The index measures the performance of the lower 30% in book-to-market of NYSE securities (plus NYSE Amex equivalents since July 1962 and Nasdaq equivalents since 1973).
Fama/French US Value Research – The index measures the performance of the higher 30% in book-to-market of NYSE securities (plus NYSE Amex equivalents since July 1962 and Nasdaq equivalents since 1973).
Fama-French US Large Value – The index measures the performance of U.S. equities in the first and second quartiles of market capitalization and with high book-to-market ratios. It is market-capitalization weighted.
Fama-French US Small Cap – The index measures the performance of U.S. equities in the third and fourth quartiles of market capitalization. It is market-capitalization weighted.
Fama-French US Small Value – The index measures the performance of U.S. equities in the third and fourth quartiles of market capitalization and with high book-to-market ratios. It is market-capitalization weighted.
FTSE All-World ex US – The index measures the performance of around 2,600 large cap and mid cap companies in 48 developed and emerging markets worldwide, excluding the US. The index is free float-adjusted market-capitalization weighted.
FTSE Global All Cap – The index measures the performance of around 8,000 large, mid and small cap companies in 49 developed and emerging markets worldwide, including the US. The index is free float-adjusted market-capitalization weighted.
FTSE Treasury Benchmark 5 Yr USD – The index measures the total returns of the current five-year Treasuries that settle by the end of the calendar month.
FTSE World Government Bond 1-3 Years (hedged) – The index measures the performance of fixed-rate, local currency, investment-grade sovereign bonds, with maturities between 1 year and 3 years. It is market-capitalization weighted.
FTSE World Government Bond 1-5 Years (hedged) – The index measures the performance of fixed-rate, local currency, investment-grade sovereign bonds, with maturities between 1 year and 5 years. It is market-capitalization weighted.
IA SBBI US 1 Year Treasury Constant Maturity TR USD – The index measures the performance of U.S. Treasury securities with 1-year constant maturity.
IA SBBI US 30 Day T Bill TR USD – The index measures the performance of 30-day maturity U.S. Treasury bills. It is unweighted.
IA SBBI US LT Govt TR USD – The index measures the performance of twenty-year maturity U.S. Treasury Bonds. It is unweighted.
ICE BofAML 1-Year US Treasury Note – The index measures the performance of a single issue purchased at the beginning of the month and held for a full month. At the end of the month that issue is sold and rolled into a newly selected issue. The issue selected at each month-end rebalancing is the outstanding two-year Treasury note that matures closest to, but not beyond, one year from the rebalancing date. To qualify for selection, an issue must have settled on or before the month-end rebalancing date.
MSCI ACWI – The index measures the performance of large and mid cap segments across 23 Developed Markets (DM) and 26 Emerging Markets (EM) countries. It covers approximately 85% of the global investable equity opportunity set.
MSCI ACWI IMI – The index measures the performance of the large, mid and small cap representation across 23 Developed Markets and 26 Emerging Markets countries. The index is comprehensive, covering approximately 99% of the global equity investment opportunity set. It is free float-adjusted market-capitalization weighted.
MSCI EAFE Small Cap – The index measures the performance of small cap segments across Developed Markets countries around the world, excluding the US and Canada. It covers approximately 14% of the free float-adjusted market capitalization in each country.
MSCI US Broad Market – The index measures the performance of the broad US equity market. It includes large, mid, small and micro cap companies, representing about 99% of the US equity universe.
NAREIT All Equity REITS – The index measures the performance of all tax-qualified REITs with more than 50 percent of total assets in qualifying real estate assets other than mortgages secured by real property that also meet minimum size and liquidity criteria. It is free-float adjusted market-capitalization weighted.
S&P 700 – The index measures the performance of the non-U.S. component of the global equity market. The index covers all regions included in the S&P Global 1200 except for the U.S., which is represented by the S&P 500.
S&P Developed ex. US Small-Cap – The index measures the performance of the stocks representing the lowest 15% of float-adjusted market cap in each developed country, excluding the U.S. It is a subset of the S&P Emerging Broad Market Index.
S&P GSCI – The index measures commodity sector returns representing an unleveraged, long-only investment in commodity futures that is broadly diversified across the spectrum of commodities. The index is made up of 24 exchange-traded futures contracts that cover physical commodities spanning the energy, industrial metals, precious metals, agriculture, and livestock sectors. Individual components qualify for inclusion in the index on the basis of liquidity and are weighted by their respective world production quantities.
S&P High Grade Corporate – The index measures the performance of U.S. corporate debt issued by constituents in the S&P 500 with an investment-grade rating, that is BBB- or higher. It is a subset of the S&P 500 Bond Index.
S&P Mid-Cap 400 – The index represents 400 stocks in the mid-range sector of the domestic stock market, representing all major industries. To be included, a stock’s market capitalization must be between $1.6 billion and $6.8 billion.
S&P Small-Cap 600 – The index measures the performance of the small-cap segment of the U.S. equity market. It includes market capitalizations of between $450 million and $2.1 billion.
S&P Global 1200 – The index measures the performance of global equities. It is comprised of seven other indices: S&P Europe 350, S&P/TOPIX 150, S&P/TSX 60, S&P/ASX 50, S&P/Asia 50, S&P Latin America 40, and S&P 500. It is free float-adjusted market-capitalization weighted.
S&P/IFCI Composite – The index measures the performance of emerging market equities. It includes companies with a float-adjusted market capitalization of at least U.S. $200 million. It is a subset of the S&P Emerging Broad Market Index, with the addition of South Korea.
Wilshire 5000 – The index measures the performance of all publicly traded stocks headquartered in the U.S. and holds over 7,000 stocks.
Wilshire REIT – The index measures the performance of U.S. publicly-traded Real Estate Investment Trusts. It’s a subset of the Wilshire Real Estate Securities Index. The purpose was to create indexes of publicly-traded real estate equity securities without the limitations of other appraisal-based indexes. These indexes serve as proxies for direct real estate investing by excluding securities whose value is not always tied to the value of the underlying real estate (mortgage REITs, net-lease REITs, real estate finance companies, mortgage brokers and bankers, commercial and residential real estate brokers, home builders, large landowners and sub-dividers of unimproved land, hybrid REITs and timber REITs).
*Unmanaged indexes are for illustrative purposes only. An investor cannot invest directly in an index.
Standard Deviation – a statistical measurement of dispersion about an average, which depicts how widely the returns varied over a certain period of time. The standard deviation of historical performance is used to try to predict the range of returns that are most likely for a given investment. When there is a high standard deviation, the predicted range of performance is wide, implying greater volatility.
Sharpe Ratio – a risk-adjusted measure calculated by using standard deviation and excess return to determine reward per unit of risk. The higher the Sharpe ratio, the better the historical risk-adjusted performance.
Sortino Ratio – another risk-adjusted measure which is a variation of the Sharpe ratio that differentiates downside volatility from total overall volatility by using the asset’s standard deviation of negative asset returns, called downside deviation. Just like the Sharpe ratio, a higher Sortino ratio is preferred, as it means that the investment is earning more return per unit of downside risk that it takes on.
Treynor Ratio – also known as the reward-to-volatility ratio, is a risk-adjusted measurement of return, based on systematic risk. It indicates how much return a portfolio earned for the amount of risk the investment assumed. The Treynor ratio shares similarities with the Sharpe ratio. The difference between the two metrics is that the Treynor ratio utilizes beta, or volatility relative to the market, instead of using total risk (standard deviation) like the Sharpe ratio.
Downside Capture – a statistical measure of a manager’s performance in down markets. A down-market is defined as those periods in which the benchmark return is negative. An investment manager who has a down-market ratio less than 100 has outperformed the index during the down-market. For example, a manager with a down-market capture ratio of 80 indicates that the portfolio declined only 80% as much as the index during the period in question. Upside Capture – a statistical measure of a manager’s performance in up markets. An up-market is defined as those periods in which the benchmark return is positive. An investment manager who has an up-market ratio greater than 100 has outperformed the index during the up-market. For example, a manager with an up-market capture ratio of 120 indicates that the manager outperformed the market by 20% during the specified period.
Information Ratio – a measure of portfolio returns above the returns of a benchmark, usually an index, relative to the volatility of those returns. The information ratio measures a portfolio manager’s ability to generate excess returns relative to a benchmark, but it also attempts to identify the consistency of those excess returns. Higher information ratios indicate a desired level of consistency, whereas low information ratios indicate the opposite.
Batting Average – a measure of a manager’s ability to consistently beat the benchmark. It is calculated by dividing the number of months in which the manager beat or matched a benchmark by the total number of months in the period. For example, a manager who meets or outperforms the benchmark every month in a given period would have a batting average of 100. A manager who beats the benchmark half of the time would have a batting average of 50.
R-square – a statistical measure that represents the proportion of the variance for a dependent variable that’s explained by an independent variable. It is generally considered the percentage of an investment’s movements that can be explained by movements in a benchmark index. A high R-squared, between 85% and 100%, indicates investment’s performance moves relatively in line with the index. An investment with a low R-squared, at 70% or less, indicates it does not generally follow the movements of the index. It is primarily used to judge the appropriateness of a benchmark for a given portfolio.
Downside Deviation – a statistical measure of downside risk that focuses on returns that fall below a minimum threshold or minimum acceptable return.
