Unequal Returns: Using the Atkinson Index to Measure Financial Risk
Thomas Fischer () and
Frederik Lundtofte ()
Additional contact information
Frederik Lundtofte: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden
No 2018:25, Working Papers from Lund University, Department of Economics
We apply the Atkinson (1970) inequality index to time series of asset returns to offer a novel measure of financial risk consistent with expected-utility theory. This measure is converted to a certainty-equivalent return serving as a performance measure. We extend the Atkinson index to HARA utility and derive closed-form solutions to our measures for a number of preference-return combinations. Further, we establish relationships between risk aversion and the weights assigned to the cumulants of the return distribution for our performance measure. Using data from hedge funds and asset-pricing anomalies, we find that our performance measure contains additional, economically meaningful information.
Keywords: risk; performance; non-Gaussian distributions; cumulants; hedge funds (search for similar items in EconPapers)
JEL-codes: G11 (search for similar items in EconPapers)
Pages: 68 pages
New Economics Papers: this item is included in nep-fmk, nep-rmg and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://project.nek.lu.se/publications/workpap/papers/wp18_25.pdf Full text (application/pdf)
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:hhs:lunewp:2018_025
Access Statistics for this paper
More papers in Working Papers from Lund University, Department of Economics Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund,Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by David Edgerton ().