Document category: Asset Allocation
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"Determinants of Portfolio Performance II: An Update,"
Gary P. Brinson, Brian D. Singer, and Gilbert P. Beebower, Financial Analysts Journal, May/June 1991.
Gary P. Brinson, Brian D. Singer, and Gilbert P. Beebower, Financial Analysts Journal, May/June 1991.
This paper was published in the (US) Financial Analysts Journal My-June 1991.
This article updates the 1986 Brinson Hood & Beebower study (see ASA100). It studies the investment performance of 82 large US pension plans for 10 years from December 1977, before management fees.
It confirms the findings of the 1986 paper. "The overall effect of active management… was negligible" (this is before taking account of charges, which of course had a negative effect). "Clearly the contribution of active management is not statistically different from zero".
Unlike the previous study which found that both market timing and stock picking decreased return, this one showed that market timing reduced return by about 0.26% p.a. but that stock picking increased returns by 0.36%, albeit with a significant increase in risk (volatility).
Overall, again they find that investment policy (asset allocation) is the overwhelming determinant of return per unit of risk, in this case 91.5% of the variance in returns, compared to 93.6% in the previous study.
This article updates the 1986 Brinson Hood & Beebower study (see ASA100). It studies the investment performance of 82 large US pension plans for 10 years from December 1977, before management fees.
It confirms the findings of the 1986 paper. "The overall effect of active management… was negligible" (this is before taking account of charges, which of course had a negative effect). "Clearly the contribution of active management is not statistically different from zero".
Unlike the previous study which found that both market timing and stock picking decreased return, this one showed that market timing reduced return by about 0.26% p.a. but that stock picking increased returns by 0.36%, albeit with a significant increase in risk (volatility).
Overall, again they find that investment policy (asset allocation) is the overwhelming determinant of return per unit of risk, in this case 91.5% of the variance in returns, compared to 93.6% in the previous study.