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X-Sigma-Rho and Market Efficiency

Author

Listed:
  • G. Glenn Baigent

    (LIU – Post, College of Management, 720 Northern Blvd., Brookville, NY 11548)

Abstract

Menchero and Davis (2011) define X-Sigma-Rho as a risk metric that shows the marginal contribution to risk when a security is added to a portfolio of other securities. While insightful regarding risk, their work is incomplete because it does not consider the marginal contribution to return. This paper completes their analysis by including marginal contribution to return. In equilibrium the result is the capital market line and a measure similar to Jensen’s alpha that can be used to measure performance.

Suggested Citation

  • G. Glenn Baigent, 2014. "X-Sigma-Rho and Market Efficiency," Journal of Economic and Financial Studies (JEFS), LAR Center Press, vol. 2(2), pages 41-44, April.
    • Handle: RePEc:lrc:lareco:v:2:y:2014:i:2:p:41-44
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    File URL: http://journalofeconomics.org/index.php/site/article/view/133/183
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    Cited by:

    1. Sourish Das & Aritra Halder & Dipak K. Dey, 2017. "Regularizing Portfolio Risk Analysis: A Bayesian Approach," Methodology and Computing in Applied Probability, Springer, vol. 19(3), pages 865-889, September.

    More about this item

    Keywords

    Market efficiency; Performance measure; X-sigma rho.;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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