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A new efficiency test for ranking investments: Application to hedge fund performance

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  • Bernard, Carole
  • Vanduffel, Steven
  • Ye, Jiang

Abstract

We extend the concept of cost-efficiency of Dybvig (1988) to account for benchmarks and provide a generalization of the efficiency test from Amin and Kat (2003). We illustrate the new efficiency test by ranking a panel of hedge funds based on their probability distribution and their interaction with a benchmark.

Suggested Citation

  • Bernard, Carole & Vanduffel, Steven & Ye, Jiang, 2019. "A new efficiency test for ranking investments: Application to hedge fund performance," Economics Letters, Elsevier, vol. 181(C), pages 203-207.
    • Handle: RePEc:eee:ecolet:v:181:y:2019:i:c:p:203-207
    DOI: 10.1016/j.econlet.2019.05.023
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    References listed on IDEAS

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    1. L. Rüschendorf & Steven Vanduffel, 2020. "On the construction of optimal payoffs," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 43(1), pages 129-153, June.

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