Alpha, Benchmarking, and Performance Attribution
Free CAIA Level II lesson in Risk and Risk Management. 38 min read, ~5,734 words.
The Hierarchy of Alpha is a six-layer pyramid, top to bottom: True Alpha, Manufactured Alpha, Transitional Alpha, Inaccessible Risk Premium, Alternative Beta, Pure Beta. Two continua define the pyramid: number of competing managers (left to right) and price elasticity of fees (top to bottom), so fees are most negotiable at...
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Check Your Understanding
- Exam Shortcuts
Learning objectives
- alpha systematic risk
- portfolio options
- delta hedging
- delta hedging observations
- mean reversion diversification
- hierarchy alpha
- types alpha
- risk premia betas
- manufactured alpha evidence
- benchmarking attribution overview
- single factor benchmarking
- multifactor benchmarking
- alt asset benchmarking
- benchmarking commodities
- benchmarking managed futures
- benchmarking pe
- peer group benchmarks
- benchmarking re
- margin collateral
- var managed futures
- other liquidity methods
- smoothed returns
- modeling smoothing
- unsmoothing hypothetical
- unsmoothing re data
- risk measurement overview
- risk aggregation
- info categories
- data freq daily weekly monthly
- data freq quarterly annual
- cybersecurity
- risk mgmt structure process
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