Omega Portfolio Construction with Johnson Distributions

Alexander Passow ()
Additional contact information
Alexander Passow: GOTTEX and FAME

FAME Research Paper Series from International Center for Financial Asset Management and Engineering

Abstract: The Omega performance measure is equiped with the original family of Johnson distributions. Explicit representations for Omega or Sharpe with all four Johnson cumulated densities were derived to construct portfolios with respect to 4 mutually independent moments. Additionally, decompositions of higher portfolio moments were derived to include expected higher moments on an individual fund or strategy level. Hedge fund index back-testing has shown that Johnson-Omega gives significantly higher returns without sacrificing capital protection needs. Omega with Johnson distributions solves the weaknesses from Sharpe and achieves a more predictable and stable performance by exploiting the persistence of potentially significant higher moments up to fourth order.

Keywords: Sharpe; Omega; Johnson distribution; Skewness; Higher Moments; Significant Moments; Portfolio Construction; Hedge Funds; Market Neutral (search for similar items in EconPapers)
JEL-codes: C16 C50 G11 (search for similar items in EconPapers)
Date: 2004-11
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.swissfinanceinstitute.ch/rp120.pdf
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.swissfinanceinstitute.ch/rp120.pdf [301 Moved Permanently]--> https://www.sfi.ch/rp120.pdf [302 Found]--> https://www.sfi.ch/en/rp120.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fam:rpseri:rp120

Access Statistics for this paper

More papers in FAME Research Paper Series from International Center for Financial Asset Management and Engineering Contact information at EDIRC.
Bibliographic data for series maintained by Ridima Mittal ().