What Is Ex-Post?
Let me explain ex-post to you directly: it's a term actuaries use for an asset's historical returns. In simple terms, ex-post means what happens after an event or the outcome of a decision. In finance, it specifically points to actual returns you've seen.
You've probably heard that using historical returns is the go-to method for forecasting the chance of losing money on an investment any given day. Ex-post, from Latin for 'after the fact,' stands opposite to ex-ante, which is 'before the event.'
Key Takeaways
- Ex-post, meaning actual returns, covers things that happen or get analyzed after an event.
- Ex-post analysis examines financial results post-occurrence and uses them to predict future returns.
- You get the ex-post value by factoring in an asset's start and end values, its growth and decline, and any income earned.
- Ex-post contrasts with ex-ante, relying on proven results rather than estimates for future performance; it's standard because it uses real data.
Understanding Ex-Post
Companies gather ex-post information to forecast future earnings, and I want you to see how it fits into studies like value at risk (VaR), which estimates the max loss a portfolio might face in a day. VaR applies to a specific portfolio, probability, and time frame.
Ex-post yield is different from ex-ante yield since it deals with actual values—what investors really earn, not estimates. You base decisions on expected versus actual returns, a key part of risk analysis. Ex-post is basically the current price minus what you paid, showing asset performance without projections or probabilities.
Calculating Ex-Post
To calculate ex-post, you use the beginning and ending asset values over a period, plus any growth, decline, and income from the asset. Analysts like me rely on this data for price fluctuations, earnings, and metrics to predict returns. It measures against expected returns to check risk assessment accuracy.
Ex-post works best for periods under a year, measuring year-to-date yield. For instance, in a March 31 quarterly report, it shows the percentage increase in your portfolio from January 1 to March 31—if it's 5%, that's the gain since the start of the year.
Ex-Post Analysis
Ex-post performance attribution, or benchmark analysis, measures your portfolio's performance by its return and correlation to factors or benchmarks. This is the traditional way for long-only funds.
Typically, it involves regression analysis: you regress the portfolio's yields against market index returns to see how much profit or loss comes from market exposure. This gives the beta to the index and the alpha gained or lost relative to it.
Ex-Post Forecasting
The formula is straightforward: (ending value - beginning value) / beginning value. Beginning value is the purchase market value, ending is the current one.
Ex-post forecasting happens at a certain time using later data. You create forecasts when future observations come in during the period, using known data to evaluate the model.
How Is Ex-Post Information Used?
Companies use ex-post info to forecast earnings—it's that direct.
How Does Ex-Post Factor Into Analysis?
It gauges portfolio performance via returns and correlations to factors or benchmarks, known as benchmark analysis.
What Is the Formula for Ex-Post?
Subtract beginning from ending value, divide by beginning value—that's ex-post.
The Bottom Line
Ex-post examines things after they've happened, letting you assess and refine strategies and decisions. It's about actual returns, with analysis viewing post-occurrence results to predict future returns.
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