@article {Cook143, author = {Graham C. Cook}, title = {Trading Benchmark Choice and Transition Management Performance Attribution}, volume = {20}, number = {2}, pages = {143--154}, year = {2011}, doi = {10.3905/joi.2011.20.2.143}, publisher = {Institutional Investor Journals Umbrella}, abstract = {This article reviews the roles and importance of trading benchmarks in transition management, with particular reference to their use in the attribution of implementation shortfall (IS). It begins with a review of the need for finer detail in IS reporting. Next, the role of, and the factors influencing, the choice of trading benchmark precedes a critical appraisal of commonly used benchmarks. The insights from this appraisal are then used to present a conceptual framework for determining the optimal execution schedule for orders where alpha capture is not a relevant consideration. In the concluding section, this framework is applied to formulate new benchmarks, based on participation rates, for evaluating the quality of execution and the measurement of market impact, namely, the negligible impact participation rate (NIPR) and the optimal trajectory participation rate (OTPR). Finally, the often overlooked issue of unobserved (latent) market impact is broached, along with suggestions for how this can be incorporated into a full attribution of IS.TOPICS: Equity portfolio management, portfolio construction, statistical methods}, issn = {1068-0896}, URL = {https://joi.pm-research.com/content/20/2/143}, eprint = {https://joi.pm-research.com/content/20/2/143.full.pdf}, journal = {The Journal of Investing} }