How will the risk (volatility) of the portfolio be measured?
The volatility of portfolio rates of return will be estimated by the annualized standard deviation of monthly returns. This is a commonly used method of estimating investment volatility because it permits measurement with a shorter time period as compared to monitoring the actual volatility of annual rates of return. 13. How will the risk (volatility) of the portfolio be evaluated versus the expected volatility? The actual volatility will be evaluated versus the expected volatility quantified in an asset/liability study. As with absolute rates of return, this is an evaluation of the Policy and the asset mix decision. 14. How will the relative risk (volatility) of the portfolio be evaluated? The volatility of the portfolio will be evaluated versus the volatility of the passive index benchmark. This is an evaluation of the success of an implementation strategy that targets lower volatility than the passive index benchmark. This is the primary method for evaluating the risk performance of
