EconPapers    
Economics at your fingertips  
 

Beyond the Sharpe ratio: An application of the Aumann–Serrano index to performance measurement

Ulrich Homm and Christian Pigorsch

Journal of Banking & Finance, 2012, vol. 36, issue 8, 2274-2284

Abstract: We propose a performance measure that generalizes the Sharpe ratio. The new performance measure is monotone with respect to stochastic dominance and consistently accounts for mean, variance and higher moments of the return distribution. It is equivalent to the Sharpe ratio if returns are normally distributed. Moreover, the two performance measures are asymptotically equivalent as the underlying distributions converge to the normal distribution. We suggest a parametric and a non-parametric estimator for the new performance measure and provide an empirical illustration using mutual funds and hedge funds data.

Keywords: Performance measurement; Sharpe ratio; Aumann–Serrano index of riskiness; Skewness; Kurtosis; Non-normality (search for similar items in EconPapers)
JEL-codes: D81 G11 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (15) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426612001033
Full text for ScienceDirect subscribers only

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:eee:jbfina:v:36:y:2012:i:8:p:2274-2284

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Series data maintained by Dana Niculescu ().

 
Page updated 2017-09-29
Handle: RePEc:eee:jbfina:v:36:y:2012:i:8:p:2274-2284