Excess Return

An Excess Return is defined as the return in excess of a comparable benchmark. The benchmark can be a single associated index series or a composite of a group of portfolio index series based on security and time-dependent portfolio assignments.

If an Excess Return is based on a single index series, the Excess Return for a period is

E(t) = R(t)-I(t),

where E(t) is the Excess Return at time t, R(t) is the security return at time t, and I(t) is the index return at time t. If the security return R(t) is based on a previous price t' that is not the previous time period, I(t) is the compounded index return from t' + 1 to t.

If an Excess Return is based on associated portfolios, the Excess Return for a period is

E(t) = R(t)-I(p(t),t)

where E(t) is the Excess Return at time t, R(t) is the security return at time t, p(t) is the portfolio assignment of the security at time t, and I(p(t),t) is the return of that portfolio at time t. If the security return R(t) is based on a previous price t' that is not the previous time period, I(p(t),t) is the compounded return of the security's portfolio return from t' + 1 to t. If the security is not assigned a portfolio assignment of the given type at time t, E(t) is set to a missing value.

When cumulating Excess Return, the security returns and the index returns are cumulated separately before subtracting the difference.