Fuzzy risk adjusted performance measures: application to Hedge funds
AbstractIn this paper, following the notion of probabilistic risk adjusted performance measures; we introduce that of fuzzy risk adjusted measures (FRAM). In order to deal efficiently with the closing-based returns bias induced by market microstructure noise, as well as to handle their uncertain variability, we combine fuzzy set theory and probability theory. The returns are first represented as fuzzy random variables and then used in defining fuzzy versions of some adjusted performance measures. Using a recent ordering method for fuzzy numbers, we propose a ranking of funds based on these fuzzy performance measures. Finally, empirical studies carried out on fifty French Hedge Funds confirm the effectiveness and give the benefits of our approach over the classical performance ratios.
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Bibliographic InfoPaper provided by LAMETA, Universtiy of Montpellier in its series Working Papers with number 12-24.
Length: 23 pages
Date of creation: Sep 2012
Date of revision: Sep 2012
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Other versions of this item:
- Sadefo Kamdem, J. & Mbairadjim Moussa, A. & Terraza, M., 2012. "Fuzzy risk adjusted performance measures: Application to hedge funds," Insurance: Mathematics and Economics, Elsevier, vol. 51(3), pages 702-712.
- NEP-ALL-2012-10-20 (All new papers)
- NEP-RMG-2012-10-20 (Risk Management)
- NEP-UPT-2012-10-20 (Utility Models & Prospect Theory)
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