Trading Evaluation & Manager Selection


Motivations to Trade 交易的目标 *4

Sample Text: In a favorably trending market, buying in a falling market or selling in a rising market, portfolio managers are better off trading at a slower pace to execute at more favorable prices expected later in the trading horizon. Favorable price movements decrease trading costs.

Trading Strategies and Strategy Selection

Trade Strategy Inputs 影响价格的因素 作为 inputs

Reference Price

Trade Implementation Choices 交易平台

Execution Algorithm 电子化 execution trading 的五个交易方法




  1. Scheduled (POV, VWAP, TWAP) 适用小订单,不适用大订单,有可能完不成交易如果illiquid

    Scheduled algorithms are appropriate for orders in which portfolio managers or traders do not have expectations for adverse price movement during the trade horizon. These algorithms are also used by portfolio managers and traders who have greater risk tolerance for longer execution time periods and are more concerned with minimizing market impact. Scheduled algorithms are often appropriate when the order size is relatively small (e.g., no more than 5%–10% of expected volume), the security is relatively liquid, or the orders are part of a risk-balanced basket and trading all orders at a similar pace will maintain the risk balance.

    1. POV (percentage of volume) 如 交易量为市场交易量的1%

      • Pros: take advantage of increase liquidity 因为与市场保持一致

      • Cons: Higher Trading Cost 由于自己与市场一致,所以价格会被推高 ,有 T.C.

      • Cons: trade may not be complete 无法保障交易达成

    2. VWAP 按交易量 (前一天的交易量分时点给做权重)然后按权重分配到此次交易中,对订单拆分

      • 有 schedule

      • 由于empirically,一个trading day 开始和结束时交易多,所以为VWAP curve 是 U shape

      • Pros: 能 compete the trade

      • Cons: 对于 illiquid stock 还是可能完不成交易

      • Cons: 无法控制 outlayer

    3. TWAP 按时间 equal-weighted time schedule

      • 有 schedule

      • Pros: exclude outlayers

      • Text Sample: Portfolio managers may choose TWAP when they wish to exclude potential trade outliers. Trade outliers may be caused by trading a large buy order at the day’s low or a large sell order at the day’s high 价格的过高和过低. If market participants are not able to fully participate in these trades, then TWAP may be a more appropriate choice. The TWAP benchmark is used by portfolio managers and traders to evaluate fair and reasonable trading prices in market environments with high volume uncertainty and for securities that are subject to spikes in trading volume throughout the day.

      • VWAP and TWAP algorithms release orders to the market following a time-specified schedule, trading a predetermined number of shares within the specified time interval (e.g., one day). Following a fixed schedule as VWAP algorithms do, however, may not be optimal for certain stocks because such algorithms may not complete the order in cases where volumes are low. Furthermore, while POV algorithms incorporate real-time volume by following (or chasing) volumes, they may not complete the order within the time period specified. TWAP algorithms, which send the same number of shares and the same percentage of the order to be traded in each time period, will help ensure the specified number of shares are executed within the specified time period. Given Bean’s stated priority of complete execution in one day, he is likely to use a TWAP algorithm for the Dynopax sell order.

  2. Liquidity Seeking 在不同市场中寻找流动性,适合小盘股,适合大单交易

    Take advantage of market liquidity across multiple venues by trading faster when liquidity exists at a favourable price.

    • Pros: Appropriate for large order, coz can execute quickly without substantial impacts

    • Cons: Prices are likely to move unfavourably during the trade horizon

  3. Arrival Price

    trade close to current market prices 尽可能按市场价格完成交易

    • Front-loaded strategy 一开始可能快速成交,然后流动性没了,就交易不出去了

    • 适合 Trade Urgency 高的投资者

    • 适合 prices are likely to move unfavourably during the trade horizon 适合着急买,预期价格会变差,所以赶紧交易的投资者

  4. Dark Strategies / Illiquidity Aggregators

    • Dark Aggregator Algorithm 适合需要匿名交易 Dark pools provide anonymity because no pre-trade transparency exists. 不确定性 uncertainty 高

    • Appropriate 适合 for:

      • 大单 large order size,

      • illiquid asset with higher ask-bid spread,

      • no need to execute the order entirely

  5. Smart Order Routers (SORs)


    • 寻求 highest probability of executing, best market price

Comparison of Markets 交易方法






交易平台 先看 (1) Size, 再看 (2) liquidity

Trade Evaluation


Implementation Shortfall IS (执行落差 显性+隐性) 交易成本拆分

The implementation shortfall (IS) metric7 is the most important ex post trade cost measurement used in finance.


Implementation Shortfall=Paper ReturnActual Return=Total Return​ ,再把 total cost 拆分成 1,2,3三部分

Paper Return = (结束时的价格 - decision的价格) * #

Actual Return = (结束时的价格 - 执行的价格) * 执行的 # - transaction cost * 执行的#

Paper 是 打算买 #1000 share @ $10,预计能涨价到 $12 , Real Cost 是 实际只买到了 #900 share (#900 = #800@$10.5 + #100@$11 其中#800股用$10.5买到,#100股用$11买到).

Trade Cost Measurement :ave


Market Adjusted Cost

用于 separate the trading cost from the general market movement 把由于市场price变动带来的trading cost 拆开: Trade cost evaluation calculates trading costs and performance relative to a specified trading cost or trading performance benchmark. 自己的交易 将对于 benchmark 交易。Costs are determined by the transaction amount paid above the reference price benchmark for a buy order. The market-adjusted cost calculation involves three steps:

MarketAdjusted Cost(bps)=ArrivalCost(bps)β×Index Cost(bps)


Index Cost=IndexVWAPIndex ArrivalPriceIndex ArrivalPrice×104bps

Trade Government 交易政策描述

List of Policy, Borning 确保合规 procedures are in line with the fiduciary duty

Performance Evaluation

Active Returnα

Performance Attribution 只管分析 return / risks 的来源,不管分析 investment quality 不管投资好坏


  1. Return-based attribtuion

    Sample Text: The returns-based attribution method is most appropriate when the underlying portfolio holdings are not readily available with sufficient frequency at the required level of detail (e.g., hedge funds).

    用 total portfolio return 总收益 来算,有的产品如 hedge funds 不会公布 return 那么 return based attribution 就不能用

    Pros: Easy

    Cons: Least accurate

    Cons: can be manipulate 因为没有分配到个股,total port容易被操纵

  2. Holding-based attribution 会考虑个体持仓,个体的收益率

    Sample Text: The holdings-based attribution method is most appropriate for investment strategies with little turnover (e.g., passive strategies) because it only references the beginning-of-period and end-of-period holdings and ignores individual transactions.

    Pros: more accurate

    Cons: fails to capture the impact of transaction 只考虑了起初期末,期中的交易没考虑到

    Holding based attribution fails to capture the impact of transactions, so holding based attribution works well for low-turnover portfolio.

    也因此,适用于 passive strategy 因为turnover低,。适用于短期的,也是因为 turnover 低

  3. Transaction-based attribution 考虑了 both holdings and transaction

    Sample Text: The transactions-based attribution method is most effective for active stock selection portfolios because it captures both the holdings and the transactions (purchases/sales) completed within the defined period, which would allow the entire excess return to be quantified and explained.

    Pros: accurate

    Cons: difficult to calculate

Return Attribution

Brinson Model 画长方形 asset allocation + securities selection
Carhart 4 Factor Model


Carhart 4 Factor Model


通过回归拆出来,哪个因子对 portfolio return 贡献更大,从而分享组合因为什么因素,带来的收益

  1. Exposure Decomposition - Duration Based 使用给clients画饼

    把 gov 和 corporate debt 拆分 Top Down

    按 duration 把债券分为 长中短期

    • Duration Effects

    • Curve Effects

  2. Yield Curve Decomposition - Duration Based 适用于分析师

    可 Top-down 可 bottom-up



  3. Yield Curve Decomposition - Full Repricing Based 过程复杂但精确,适用professional

    计算每个时点 sport rate 对价格的影响


Return Attribution Analysis at Multiple Levels

Risk Attribution 风险归因


Type of Attribution Analysis

Investment Decision Making ProcessRelative (vs. Benchmark)Absolute
Bottom up 从个体security 看Position’s marginal contribution to tracking riskPosition’s marginal contribution to total risk
Top down 由行业看到个体Attribute tracking risk to relative allocation and selection decisionsFactor’s marginal contribution to total risk and specific risk
Factor based 四因子Factor’s marginal contribution to tracking risk and active specific riskSame as the above

Benchmarking Investments and Managers

Property of being a Good Benchmark (SAMURAI)

Asset-Based Benchmarks

Evaluating Benchmark Quality


B 左边 相当于 与基金经理能录无关

B 右边 相当于基金经理通过自己能力挣的钱

Screenshot 2023-11-30 at 16.59.35

If 一个benchmark好,要能把A、S区分开。那么 A 与 S 的相关性要低, ρ(A,S)=0。因为 A 为基金经理的能力, S 不为能力

If 一个benchmark好,ρ(S,E)=ρ(S,S+A) 高,这个相关系数高与上式一致,意味着 S & A的相关性低ρ(A,S)=0,则ρ(S,E)=ρ(S,S+A)

Benchmark for Alternatives Investment


Performance Appraisal 用来分析FM水平

review the quality of performance and distinguish between manager skill and luck

Manager Selection Process

Insert 1

Manager Universe 先确定可选的范围

所有 feasible manager 可选的基金经理

The manager universe 提前根据 IPS filter了符合的

  1. suitability

  2. style,

  3. passive/active suitable

Type I & Type II Error of Manager Selection

特别扯淡part Type I and Type II errors in manager selection


Style analysis 时刻关注是否FM的投资style 有变化
Capture Ratio 见此前提到 UC/DC
Drawdown 见此前提到

Stress-test of the investment process when princple-agent conflicts arise


Investment Due Diligence

Operational DD 定性分析公司运营、治理情况,制度等

Experienced investment personnel is a key aspect of investment due diligence.

A strong back office and suitable investment vehicles are key aspects of operational due diligence

Management Fee

Performance-based fee structures convert symmetrical gross active return distributions into asymmetrical net active return distributions, reducing variability on the upside but not the downside. As a result, a single standard deviation calculated on a return series that incorporates active returns, above and below the base fee, can lead to the underestimation of downside risk. In contrast, fully symmetric fees (fully exposing the manager to both upside and downside results) tend to yield closer alignment in risk and effort than bonus-style fees.


一般来说 performance fee 高,意味着 Higher active investment