Risk-adjusted performance measures and implied risk-attitudes
Auke Plantinga and
Sebastiaan de Groot
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Sebastiaan de Groot: Groningen University
No 01E57, Research Report from University of Groningen, Research Institute SOM (Systems, Organisations and Management)
Abstract:
In this article we study the relation between performance measures and preferences functions. In particular, we examine to what extent performance measures can be used as alternatives for preference functions. We study the Sharpe ratio, Sharpe’s alpha, the expected return measure, the Sortino ratio, the Fouse index, and the upside potential ratio. We find that the first three measures correspond to the preferences of investors with a low degree of risk aversion, whereas the latter three measures correspond to the preferences of investors with intermediate and high degrees of risk aversion.
Date: 2001
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Persistent link: https://EconPapers.repec.org/RePEc:gro:rugsom:01e57
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