Performance evaluation portrays a manager's success based on examination of the return generated in the investment process. Studies have been conducted to review the investment performance of managed portfolios, wherein Sharpe (1966), Treynor (1965), Jensen (1968), Graham and Harvey (1996), Modigliani and Modigliani (M2, 1997) have developed theoretical measures to evaluate/rate the performance of managed portfolios; while the studies conducted by Smith & Tito (1969), Klemosky (1973), Jobson & Korkie (1981) and Kane and Marks (1988), Elton, et al., (1996) dwell on the performance evaluation of such portfolios. The present study has examined the investment performance of managed portfolios with regard to sustainability of such performance in relation to fund characteristics, parameter stationarity and benchmark consistency. The results reported in the study documented evidence supporting parameter stationarity and the identical persistence of investment performance across all the measurement criteria. Superior performance differentiation was discerned in relation to the fund characteristics. The results reported were very robust to provide credence to the performance comparability across diverse market indices and to negate the myth regarding fund managers' predisposition for a particular index for better performance reporting. These results have wider implications for investment managers to devise trading strategies commensurate with the investor expectations. Investors may also derive wisdom in the results with regard to the absence of statistical evidence to fund manager's ability to beat the markets. The significance of the study lies with regard to the endorsement of parameter stationary and benchmark consistency of the investment performance as its significant contribution to the existing literature.

Since performance measurement portrays managed portfolios’ success, it is equally important that such performance is measured in an unambiguous manner acceptable to the industry participants and academicians to avoid any confusion or misrepresentation. Though risk-return analysis is an important dimension of investment performance evaluation, it is not adequate to depict the whole picture. Therefore, it is imperative to examine the ex post investment performance in relation to the theoretical measures taking due cognizance of risk and return simultaneously along with the benchmark return. The essential idea for this is to compare the returns generated by investment manager through active fund management with the returns that could have been earned by investing in a passive benchmark portfolio at a given risk level. Such an analysis is expected to be more prudent to evaluate investment performance on relative basis than
in terms either for risk or return alone.

A portfolio manager may generate superior return by exposing investments to a higher risk level than the unmanaged portfolios. It needs to be examined whether this higher risk exposition has yielded commensurate return. The performance evaluation methodology should take cognizance of such vital issues in its ambit to rate performance in an
unambiguous manner that considers the relative risk level and strength of the market for meaningful investment analysis. Such a measure should adjust portfolio returns to the relative risk; given the strength of market in the evaluation period. In finance literature two widely acknowledged such risk-adjusted measures exist which are based on two divergent viewpoints on risk, one (Treynor, 1965) takes market risk (return volatility) and the other (Sharpe, 1966) considers total risk (return variability) in the evaluation of investment performance of managed portfolios. Keeping the aforementioned issues in relation to the investment performance ratings, it would be very curious to investigate the investment performance differential on the measurement criterion for parameter stationary as well for the benchmark consistency.

Applied Finance Journal, Informational Efficiency, Performance Evaluation, Performance Measurement, Market Risk, Investment Analysis, Indian Capital Markets, Mutual Funds, Stock Market Volatility, Investment Portfolios, Mutual Fund Industries.