Portfolio Performance Measure and A New Generalized Utility-based N-moment Measure
AbstractMost of the performance measures proposed in the financial and academic literature are subject to be gamed in an active management framework (Goetzmann et al., 2007). One of the main reasons of this drawback is due to an incomplete characterization by these measures of studied return distributions. We introduce a new flexible Generalized Utility-based N-moment measure of performance (GUN, in short), characterizing the whole return distribution, and thus hardly gamable. More precisely, it takes into account the first four moments of the return distribution and the associated sensitivities of the studied agent, reflecting his preferences and risk profile. The new performance measure is also well adapted for analyzing performance of hedge funds and more peculiarly in presence of derivative instruments associated with non-Gaussian return distributions. Length: 34
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Bibliographic InfoPaper provided by Department of Economics, University of Venice "Ca' Foscari" in its series Working Papers with number 2013:22.
Date of creation: 2013
Date of revision:
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Web page: http://www.unive.it/dip.economia
More information through EDIRC
Utility Function; Performance Measures; Agents’ Preferences; Portfolio Ranking;
Find related papers by JEL classification:
- C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Econometric and Statistical Methods; Specific Distributions
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-11-02 (All new papers)
- NEP-HRM-2013-11-02 (Human Capital & Human Resource Management)
- NEP-RMG-2013-11-02 (Risk Management)
- NEP-UPT-2013-11-02 (Utility Models & Prospect Theory)
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