Practitioner Portfolio Construction and Performance Measurement: Evidence from Europe

Responses to a survey of investment management practitioners in Europe show that most practitioners are aware of key academic concepts in portfolio construction. But they still resort to ad hoc heuristics when they construct portfolios. Consideration of risk–return matters is less common in performance evaluation than in portfolio construction. An economically significant firm-size effect plays a role in the use of sophisticated (versus unsophisticated) portfolio construction but not in performance measurement.