ROIC versus Portfolio Return

[taowave]

Good old ROA vs ROE..Watch out for that sneaky leverage

In the book valuations (published by McKinsey) they say the only real quality value creation can be seen when you seek to maximize ROIC. Maximizing ROE can mask poor quality returns through leverage.

 

[newwurldmn]

Good old ROA vs ROE..Watch out for that sneaky leverage

Heheh. It’s very seductive and very sneaky.

I’ve been thinking about how to calculate ROIC for my book. For two of the key strategies it’s easy. But I can’t figure out how to do the vol piece. How would you calculate invested capital for a vol book? I’m struggling with this part.