One-sided performance measures under Gram-Charlier distributions

Angel León and Manuel Moreno

Journal of Banking & Finance, 2017, vol. 74, issue C, 38-50

Abstract: We derive closed-form expressions for risk measures based on partial moments by assuming the Gram-Charlier (GC) density for stock returns. As a result, the lower partial moment (LPM) measures can be expressed as linear functions on both skewness and excess kurtosis. Under this framework, we study the behavior of portfolio rankings with performance measures based on partial moments, that is, both Farinelli-Tibiletti (FT) and Kappa ratios. Contrary to previous results, significant differences are found in ranking portfolios between the Sharpe ratio and the FT family. We also obtain closed-form expressions for LPMs under the semi non-parametric (SNP) distribution which allows higher flexibility than the GC distribution.

Keywords: Lower/upper partial moment; Certainty equivalent; Rank correlation; Semi non-parametric distribution (search for similar items in EconPapers)
JEL-codes: C10 C61 G11 G17 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:74:y:2017:i:c:p:38-50

DOI: 10.1016/j.jbankfin.2016.10.005

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