THE PERFORMANCE MEASUREMENT AND EVALUATION OF A CORPORATE RETIREMENT PLAN: A CASE STUDY

This paper is based on an actual study of a pooled profit-sharing plan sponsored by a Fortune 50 company from September 1978 to June 1983. The purpose of performance measurement is to identify skill at portfolio management and provide evidence indicating whether performance coincides with the investment skills claimed by the portfolio manager. The approach here is to apply the security market line analysis suggested by Fama. Characteristic lines were determined for the plan portfolio allowing the calculation for alpha, the Jensen differential performance index, beta, and R². Tests are made to determine if the investment manager was able to achieve superior performance by shifting portfolio market sensitivity in anticipation of major market moves (market-timing effect) and/or selecting undervalued securities (security-selection effect).