Market implementation shortfall

Did a Boston CFA Society mock exam last week which had a question on market implementation shortfall.

I did not even know what it was. Just reminding everyone

Return is calulated from the market model assuming alpha is zero or Zero factor model. so

R= beta x Rm

then market imp shortfal is calculated as

Market imp shortfall= imp shortfall - R

market adjusted implementation shortfall (MAIS)

sorry, agree with your corrected terminology

don’t worry, CFAI will do the same crap on the exam.

they will call something Social Proof bias when 99% of planet Earth along with every organizational behavior MBA textbook call it Groupthink…

This is exactly what I am afraid of on the exam - their liberal use of terminology. Trying to figure out what the heck some figure in a table is actually referring to, just because they are purposefully being obtuse, can be maddening.

For example, in a management style evaluation question, calling R-squared something odd can easily throw you off if you’re not ready for it.

Feels like stepping up to the plate and waiting on a fast ball - only to strike out on the slow curve.

That’s why I’m going to pay special attention to CFAI data presentation during these final two weeks of cramming.

you talking returns based analysis?

From the Glossary of terms , page G-12 of book 6 :

Market-adjusted implementation shortfall The difference between the money return on a notional or paper portfolio and the actual portfolio return, adjusted using beta to remove the effect of the return on the market. " (Institute G-12) Institute, CFA. Level III 2012 Volume 6 Portfolio: Execution, Evaluation and Attribution, and Global Investment Performance Standards, 5th Edition. Pearson Learning Solutions. . There are some other terms in there that were vague to me as well like “Market-Not-Held-Order” Guess what that is?

Market-not-held-order : Variant of a market order where the trader is given dicretion as to when the place & execute the order

confusion is Best efforts order also gives discretion to trader ( i think the degree of discretion differentiates the two? )

slightly different perspective I think . Market-not-held is a strategy employed by the broker , he quotes a price he believes is a fair market price , but he can back out before the order is executed depending on where prices go.It is a relaxed strategy with no particular urgency

best efforts is a kind of order request from invetment manager to brokker or trader , gving them leeway to do the best job possible , given some sort of urgency is completing the deal.

can somebody explain - market adjusted implementation shortfall (MAIS) ?

Wil3, its in the text right under the implementation shortfall example.

thanks. so basically in MAIS, we are removing the effect of the market return ?

Prophets wrote: “you talking returns based analysis?”

Yeah, didn’t mean to go off topic.

Back in L2 quant days, I seem to remember R-squared being referred to as ‘multiple R’ and thinking wtf? Don’t think I answered that question correctly…tripped up by CFAI terminology. There are probably a dozen similar examples we could come up with, but our time is better spent on other things now.

MAIS = IS-beta*Rm