L-performance with an application to hedge funds
This paper introduces a new parametric fund performance measure, called the L-performance. The L-performance is an alternative to the Sharpe performance, which is commonly used in practice despite its inability to account for skewness and heavy tails of unconditional return distributions. The L-performance improves upon the Sharpe measure in this respect. Technically, it resembles the Sharpe measure in that it is defined as a ratio of the first- and second-order moments, which are the trimmed L-moments instead of the conventional (power) moments. The trimming parameters allow for focusing the L-performance on specific risk levels of interest, according to financial risk criteria. For illustration, a set of L-performances is computed for a variety of hedge funds. The empirical study shows the use of L-performance for fund ranking and return smoothing (manipulation) control.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Norvaisa, Rimas, 1993. "The central limit theorem for empirical and quantile processes in some Banach spaces," Stochastic Processes and their Applications, Elsevier, vol. 46(1), pages 1-27, May.
- Gourieroux, C. & Jasiak, J., 2008.
"Dynamic quantile models,"
Journal of Econometrics,
Elsevier, vol. 147(1), pages 198-205, November.
- Haley, M. Ryan & McGee, M. Kevin, 2006. "Tilting safety first and the Sharpe portfolio," Finance Research Letters, Elsevier, vol. 3(3), pages 173-180, September.
- Mila Getmansky & Andrew W. Lo & Igor Makarov, 2003.
"An Econometric Model of Serial Correlation and Illiquidity in Hedge Fund Returns,"
NBER Working Papers
9571, National Bureau of Economic Research, Inc.
- Getmansky, Mila & Lo, Andrew W. & Makarov, Igor, 2004. "An econometric model of serial correlation and illiquidity in hedge fund returns," Journal of Financial Economics, Elsevier, vol. 74(3), pages 529-609, December.
- Getmansky, Mila & Lo, Andrew & Makarov, Igor, 2003. "An Econometric Model of Serial Correlation and Illiquidity In Hedge Fund Returns," Working papers 4288-03, Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Bawa, Vijay S., 1978. "Safety-First, Stochastic Dominance, and Optimal Portfolio Choice," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 13(02), pages 255-271, June.
- Karvanen, Juha, 2006. "Estimation of quantile mixtures via L-moments and trimmed L-moments," Computational Statistics & Data Analysis, Elsevier, vol. 51(2), pages 947-959, November.
- Vytaras Brazauskas & Bruce L. Jones & Ricardas Zitikis, 2007. "Robustification and performance evaluation of empirical risk measures and other vector-valued estimators," Metron - International Journal of Statistics, Dipartimento di Statistica, Probabilità e Statistiche Applicate - University of Rome, vol. 0(2), pages 175-199.
- Burgstahler, David & Dichev, Ilia, 1997. "Earnings management to avoid earnings decreases and losses," Journal of Accounting and Economics, Elsevier, vol. 24(1), pages 99-126, December.
- Koenker,Roger, 2005.
Cambridge University Press, number 9780521608275, October.
- Bruce L. Jones & Ricardas Zitikis, 2005. "Testing for the order of risk measures: an application of L-statistics in actuarial science," Metron - International Journal of Statistics, Dipartimento di Statistica, Probabilità e Statistiche Applicate - University of Rome, vol. 0(2), pages 193-211.
- Elamir, Elsayed A. H. & Seheult, Allan H., 2003. "Trimmed L-moments," Computational Statistics & Data Analysis, Elsevier, vol. 43(3), pages 299-314, July.
- Ghislain Yanou, 2008. "Extension of Random Matrix Theory to the L-moments for Robust Portfolio Allocation," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00349205, HAL.
When requesting a correction, please mention this item's handle: RePEc:eee:empfin:v:16:y:2009:i:4:p:671-685. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.