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Portfolio Performance Measure and A New Generalized Utility-based N-moment Measure

Author

Listed:
  • Monica Billio

    () (Department of Economics, University Of Venice C� Foscari)

  • Gregory Jannin

    (Variances and University Paris I)

  • Bertrand Maillet

    (University La Reunion and University of Orl�ans)

  • Loriana Pelizzon

    (Department of Economics, University of Venice Ca� Foscari)

Abstract

Most 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

Suggested Citation

  • Monica Billio & Gregory Jannin & Bertrand Maillet & Loriana Pelizzon, 2013. "Portfolio Performance Measure and A New Generalized Utility-based N-moment Measure," Working Papers 2013:22, Department of Economics, University of Venice "Ca' Foscari".
  • Handle: RePEc:ven:wpaper:2013:22
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    More about this item

    Keywords

    Utility Function; Performance Measures; Agents� Preferences; Portfolio Ranking;

    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

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