Arno Weber

Portfolio Opportunity Distributions

A Portfolio Opportunity Distribution (POD) is the probability distribution function of the return of an investor, provided that he manages his portfolio according to a random strategy. (This idea is similar to a gorilla selecting his favorite stocks by throwing darts at the financial newspaper).

If we compare the investor's realized return with the POD, we achieve insight in what his porformance really is, compared with the opportunities in the market. Is the manager's skillful in selecting his financial assets, or was he just lucky? PODs answer this question without suffering from the biases inherent in traditional methods (benchmarks and peer groups). This makes PODs a useful technique for Investment Performance Analysis.

In 2007 I did my master thesis about PODs. If you want to learn more on this subject, you could download the following material:


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