Measurement of investment portfolio performances

Management of investment portfolio includes \ntechnical and fundamental analysis, selection \nof appropriate securities, designing the optimal \nportfolio structure, portfolio performance measurement, \nmonitoring and portfolio rebalancing. \nInvesting in securities involves active, balanced \nor passive investment strategies. In addition, the \nstructure of investment portfolio consists of investment \nsecurities and trading book. Investment \nsecurities include liquid part that is a secondary \nliquidity reserve and the income part which is held \nto maturity in order to achieve the greatest possible \nprofit. Trading book are securities that are traded \ncontinuously in order to make a profit according \nto current price differences. Investment activities \nare based on information about rates of return, the \ndegree of risk, economic forecasts and risk preferences. \nAfter creating an optimal portfolio that is \non the efficiency frontier, investment managers \nperform ongoing monitoring by measuring performance \nof securities. Investment instruments \nand tools for evaluating portfolio performance \nare quite developed: Sharpe’s index, Treynor’s index, \nSortino ratio, Jensen index, Modigliani alpha \nindex, CAPM and APT. Using these indices and \nmodels, portfolio managers assess portfolio performance \nand redesign the portfolio structure to \nbring current portfolio to the efficiency frontier as \nclose as possible. Usability of these models and \ntechniques are in creating and maintaining an optimal \ninvestment portfolio in accordance with the \npreferences of investors in terms of yield and risk.