Stochastic dominance and the omega ratio

Wai Mun Fong

Finance Research Letters, 2016, vol. 17, issue C, 7-9

Abstract: The Omega ratio is an intuitive performance measure that encodes investors' desire for higher upside returns and aversion to losses. This paper shows that unlike the popular Sharpe ratio, the Omega ratio is consistent with second-order stochastic dominance which goes beyond the first two moments. Practical implications of this result are discussed.

Keywords: Investments; Performance measurement; Downside risk; Omega ratio; Stochastic dominance (search for similar items in EconPapers)
JEL-codes: C01 C02 C14 G11 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:17:y:2016:i:c:p:7-9

DOI: 10.1016/j.frl.2015.10.026

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