The fact that investment policies are often restricted appears to have been neglected in the performance measurement literature. This paper, using a standard information model, shows how the introduction of constraints on the proportion of assets to be invested in the market affect the expected portfolio returns and the value of a portfolio manager's performance. The results are related to the classical Treynor and Mazuy (1966) conjectures about characteristic lines.

ABSTRACT The fact that investment policies are often restricted appears to have been neglected in the performance measurement literature. This paper, using a standard information model, shows how the introduction of constraints on the proportion of assets to be invested in the market affects the expected portfolio returns and the value of a portfolio manager's performance. The results are related to the classical Treynor and Mazuy (1966) conjectures about characteristic lines.

The fact that investment policies are often restricted appears to have been neglected in the performance measurement literature. This paper, using a standard information model, shows how the introduction of constraints on the proportion of assets to be invested in the market affects the expected portfolio returns and the value of a portfolio manager's performance. The results are related to the classical Treynor and Mazuy (1966) conjectures about characteristic lines.