A nonparametric quantity-of-quality approach to assessing financial asset return performance

M. Ryan Haley ()
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M. Ryan Haley: University of Wisconsin Oshkosh

Annals of Finance, 2018, vol. 14, issue 3, No 3, 343-351

Abstract: Abstract This paper adapts two recent developments from the bibliometric literature to the problem of assessing the return performance of a financial asset. The result is a quantity-of-quality metric, which is both nonparametric and moment-free. As such, it offers a nonstandard perspective on the informational patterns in asset returns, and accordingly can complement traditional moment-based asset evaluation methods. The proposed approach is simple to apply, and while moment-free, captures intuitively important aspects of asset performance such as location, upside potential, downside risk, and volatility. It can also be expressed as a reward-to-risk ratio, which serves as a counterpart to the Sharpe ratio. Empirical and simulation results suggest that, relative to the Sharpe ratio, the proposed approach prefers assets with moderately higher means and standard deviations, and more favorable skewness.

Keywords: Nonparametric estimation; Moment-free decision models; h-index; e-index (search for similar items in EconPapers)
JEL-codes: G02 G11 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1007/s10436-018-0319-2

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