Policy Effect Definition

Below please find a definition of “Policy Effect”

Financial Analysis Training & Glossary TermsPolicy Effect: The policy effect is the measure of the returns between the portfolio which sticks to a set guideline of investing vs. a neutral market position.

While policy effect statistic alone isn’t extremely exciting, the issue of how long you can accurately measure and rely upon the policy effect is more important. For example, if you are an analyst trying to the “best” global macro hedge funds for your firm’s portfolio you will probably be looking at hedge fund managers with long track records. If two of these managers both have great track records but one significantly shifted their investment policy/guidelines during the last three years than it is hard to measure the true policy effect over the length of full track record. This is not to say that many hedge fund managers investment policies don’t or shouldn’t change over time, but it can cause institutional consultants and fund of funds to consider watching from the sidelines for a few more quarters or years to see how an adjusted approach pans out.

Free MP3 Download:  To download our free 35 minute audio interview with expert Richard C. Wilson on how to succeed in the field of finance please click here.

Fast Financial Training: If you want to take your finance or business career to the next level you should explore our financial analysis certification program, or our training programs on financial modeling, investment banking, hedge funds, or private equity. All of these programs are offered on http://BusinessTraining.com

Expand Your Financial Vocabulary: Read more finance terms and definitions

Tags:  Policy Effect, Policy Effects, Policy Effect Definition, Investment Policy Effect, Investment Guideline Effect, Investment Guidelines Effect

About Richard Wilson