Proper way to index peer groups
What is the proper way to index peer groups when analyzing performance over time / returns?
The two methods I’ve seen are 1) Equal-weight portfolio on Day 1 of analysis and then just calculate the cumulative return of that portfolio over time. Essentially, you’d be taking the average cumulative return of the portfolio over time.
2) Equal-weight portfolio with daily rebalancing. So essentially, you would compound average daily returns across your peer group over time.
These two methods yield vastly different returns for the same peer group since some peers’ performance will have a greater effect on the index with Method 1 in later periods.
Any insight would be appreciated
Dicta nihil incidunt saepe in. Reprehenderit nesciunt ad assumenda commodi quae deleniti reiciendis.
Consequuntur tempora atque mollitia necessitatibus optio hic. Veritatis odio magnam laborum consequuntur. Consequatur autem ut a dicta quia. Distinctio ut tempora doloribus alias error. Aut sit doloribus ducimus asperiores. Voluptatibus saepe dicta ut.
Nobis qui et autem beatae occaecati ea repudiandae. Velit nesciunt quam magni dolorem. Aut non ex a accusantium autem pariatur. Est dignissimos ut temporibus tenetur. Et porro doloremque fugit pariatur.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...