Platform For Mutual Fund Schemes Research

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Research Terminology

SD - Standard deviation measures the dispersion of a set of data points from their mean. In finance, it represents the volatility of an asset's returns over a specific period, indicating the degree of variation or risk associated with the asset. Higher SD implies higher volatility and higher risk.

Beta - Beta is a measure of an asset's volatility in relation to the overall market. A beta greater than 1 indicates that the asset is more volatile than the market, while a beta less than 1 means it is less volatile.

Alpha - Alpha represents the excess return of an investment relative to the return of a benchmark index. It measures an asset's performance on a risk-adjusted basis, indicating the value added by an investment manager's decisions. Higher alpha implies good portfolio performance with respect to benchmark.

Jensen's Alpha - Jensen's Alpha calculates the abnormal return generated by a portfolio over the expected return predicted by the Capital Asset Pricing Model (CAPM). It is used to determine the effectiveness of a fund manager in generating returns above the market-adjusted expectation. Higher Jensen's Alpha implies good portfolio performance with respect to benchmark.

Sharpe Ratio - The Sharpe Ratio measures the risk-adjusted return of an investment. It is calculated by subtracting the risk-free rate from the asset's return and dividing the result by the standard deviation of the asset's returns, indicating how well the return compensates for the risk taken. A Positive Sharpe Ratio implies positive risk-adjusted return of an investment whereas a Negative Sharpe Ratio implies the reverse.

Treynor Ratio - The Treynor Ratio, similar to the Sharpe Ratio, measures the risk-adjusted return of an investment, but it uses beta as the risk measure instead of standard deviation. This ratio indicates how much excess return was generated per unit of market risk. A Positive Treynor Ratio implies positive excess return of an investment generated per unit of market risk whereas a Negative Treynor Ratio implies the reverse.

Sortino Ratio - The Sortino Ratio is a variation of the Sharpe Ratio that differentiates harmful volatility from overall volatility by using downside deviation instead of standard deviation. It measures the risk-adjusted return of an investment, focusing on downside risk only. A Positive Sortino Ratio implies positive risk-adjusted return of an investment focussing on downside risk.

Important Contributors To Modern Capital Market Theory

Harry Markowitz is a distinguished American economist renowned for his groundbreaking work in modern portfolio theory, for which he was awarded the Nobel Prize in Economic Sciences in 1990. His seminal contribution, the concept of portfolio optimization, fundamentally transformed investment strategies by introducing the notion of diversification to minimize risk while maximizing returns.

William F. Sharpe is a renowned American economist best known for his contributions to financial economics, particularly in the development of the Capital Asset Pricing Model (CAPM) and the creation of the Sharpe Ratio, a measure of risk-adjusted investment performance. His work has had a profound impact on the field of finance, influencing both academic research and practical investment management.

Jack L. Treynor was a prominent American economist and one of the key figures in the development of financial theory, particularly known for his contributions to the Capital Asset Pricing Model (CAPM) and the creation of the Treynor Ratio, a measure of risk-adjusted investment performance.

Frank A. Sortino is a prominent figure in finance, known for his influential contributions to portfolio management and performance measurement. He co-developed the Sortino Ratio, a key metric used to evaluate the risk-adjusted return of investment portfolios, focusing specifically on downside risk. His work has had a profound impact on how professionals assess and manage investment portfolios to optimize returns while managing risk effectively.

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Siddhant Bhardwaj is the lead architect and developer of this project. He is a graduate of the University of Arizona in Computer science and has previously worked with Verizon. Apart from coding, he is also engaged as a writer on the subjects of technology, digital governance and software engineering. He is also the author of 2 books and a columnist on Substack.

Sanat Bhardwaj holds an experience of nearly 3 decades in the financial domain, including a decade of engagement in providing corporate training on capital markets and mutual funds. He has conducted 3000 seminars and training programs and influenced over 1 lakh participants. He is also a resource person for NISM and regular faculty for NSE, BSE, ICICI AMC, Bajaj AMC and several universities across India.