Beyond the Sharpe ratio: An application of the Aumann–Serrano index to performance measurement
Ulrich Homm and
Journal of Banking & Finance, 2012, vol. 36, issue 8, 2274-2284
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)
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)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
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 ().