Seeking Gamma

Lost in the shuffle last week was this fascinating discussion at Morningstar about a new way to judge and evaluate the relative success of one’s retirement portfolio – not through the traditional lens of alpha and beta…

From Morningstar:

The benefits from “good” financial-planning decisions are difficult to quantify. For any given portfolio, investment decisions generally can be decomposed into two primary components: beta and alpha. Beta can be defined as the systematic risk exposures of the portfolio (usually achieved through asset allocation), and alpha is the residual (skill or luck-based) component associated with the various flavors of active management, such as tactical asset allocation, security selection, and more. Alpha and beta are at the heart of traditional performance analysis; however, their impact on a successful retirement can be far less important than other financial- planning decisions.

In this article, we introduce a concept called “Gamma,” which is designed to measure the additional expected retirement income achieved by an individual investor making intelligent financial-planning decisions. Gamma is the third letter in the Greek alphabet (preceded by alpha and beta), and within financial economics, it is sometimes used as the variable denoting an investor’s degree of risk aversion. Given that Gamma is relatively unclaimed within financial literature, we seek to give it new meaning.

Keep Reading:

Alpha, Beta, and Now … Gamma (Morningstar)

Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.

What's been said:

Discussions found on the web
  1. vacancy in har​yana commented on Dec 14

    vacancy in har​yana

    […]Here is a good Weblog You might Locate Intriguing that we Encourage You[…]

  2. tile and grout cleaning weston fl commented on Dec 15

    tile and grout cleaning weston fl

    […]the time to read or visit the subject material or sites we have linked to below the[…]

  3. rotating rabbit commented on Dec 15

    rotating rabbit

    […]we came across a cool internet site which you may get pleasure from. Take a appear should you want[…]