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State What Selection Device Validity Is and Why It Is

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State what selection device validity is and why it is important.


Definitions:

Total Excess

The amount by which returns on an investment exceed the benchmark or risk-free return over a specified period.

Bogey Portfolio

An investment portfolio that serves as a benchmark against which other portfolios' performances are measured.

Geometric Average

A method of calculating the average rate of return of a set of values multiplicatively linked together, commonly used to determine the performance of investments over time.

Compounding Principle

The process in which an asset's earnings, from either capital gains or interest, are reinvested to generate additional earnings over time.

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