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Measuring performance in a dynamic world: Conditional mean-variance fundamentals

  • Jha, Ranjini
  • Korkie, Bob
  • Turtle, Harry J.
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    We develop conditional alpha performance measures that are consistent with conditional mean-variance analysis and the magnitude and sign of the implied true conditional time-varying alphas. The sequence of conditional alphas and betas is estimable from surprisingly simple unconditional regressions. Other common performance measures are derivable from the conditional investment opportunity set based on its conditional asset return moments. Our bootstrap analysis of Morningstar mutual fund returns data demonstrates that the differences between existing conditional alpha measures and our proposed alpha are substantive for typical parameterizations.

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    File URL: http://www.sciencedirect.com/science/article/B6VCY-4W26GDC-2/2/94418f2a0e243fcbee65efb6e9a66b33
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    Article provided by Elsevier in its journal Journal of Banking & Finance.

    Volume (Year): 33 (2009)
    Issue (Month): 10 (October)
    Pages: 1851-1859

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    Handle: RePEc:eee:jbfina:v:33:y:2009:i:10:p:1851-1859
    Contact details of provider: Web page: http://www.elsevier.com/locate/jbf

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    8. Christopherson, Jon A & Ferson, Wayne E & Glassman, Debra A, 1998. "Conditioning Manager Alphas on Economic Information: Another Look at the Persistence of Performance," Review of Financial Studies, Society for Financial Studies, vol. 11(1), pages 111-42.
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