Classic performance indexes revisited: axiomatic and applications

Fernando Gómez-Bezares and Fernando R. Gómez-Bezares

Applied Economics Letters, 2012, vol. 19, issue 5, 467-470

Abstract: In this short article we revisit three classic performance indexes: Sharpe, Treynor and Jensen, adding a fourth index, the Penalized Internal Rate of Return (PIRR), which is perfectly coherent with those three. We propose some axioms that support the logic of these indexes, identifying one exception for the Treynor index and warning about the problems of quotients use. All these are empirically supported.

Date: 2012
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DOI: 10.1080/13504851.2011.583211

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