Portfolio Performance Measures: Rapid Fire

What this video covers

• Why current yield is never the whole story, and how total return captures price changes the exam hides in bond scenarios
• The exact bond yield hierarchy at premium, discount, and par, and which yield sits where
• Why dividing a multi-year return by the number of years is always wrong, and how to apply the geometric annualization formula (1 + holding period return)^(1/n) - 1
• How time-weighted return (TWR) strips out cash flows to grade the manager, and why Global Investment Performance Standards (GIPS) require it
• Why dollar-weighted return (DWR) equals the internal rate of return (IRR) and grades the investor's actual experience
• When the Sharpe ratio applies to total risk (standard deviation) versus when alpha applies to systematic risk (beta via the capital asset pricing model, CAPM)
• The exact CAPM-expected-return calculation you must complete before finding alpha, and why return minus market return is a deliberate exam trap
• How to compute tax-equivalent yield (TEY) by dividing, never multiplying, the tax-exempt yield by (1 - tax rate)
• Why the Dow Jones Industrial Average (DJIA) is price-weighted while the S&P 500 is market-cap weighted, and which benchmarks match small-cap, international, and bond strategies