Portfolio Performance Manipulation and Manipulation-proof Performance Measures
Numerous measures have been proposed to gauge the performance of active management. Unfortunately, these measures can be gamed. Our article shows that gaming can have a substantial impact on popular measures even in the presence of high transactions costs. Our article shows there are conditions under which a manipulation-proof measure exists and fully characterizes it. This measure looks like the average of a power utility function, calculated over the return history. The case for using our alternative ranking metric is particularly compelling for hedge funds whose use of derivatives is unconstrained and whose managers' compensation itself induces a nonlinear payoff. , Oxford University Press.
Volume (Year): 20 (2007)
Issue (Month): 5 (2007 17)
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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.:
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- Jagannathan, Ravi & Korajczyk, Robert A, 1986. "Assessing the Market Timing Performance of Managed Portfolios," The Journal of Business, University of Chicago Press, vol. 59(2), pages 217-235, April.
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