A meta-measure of performance related to both investors and investments characteristics

Omega Compatibility: A Meta-analysis

“…Notably, this provides, fortunately for Omega, some rational incentives for the use of the Omega ratio as a performance measure since rational investors prefer this characteristic because of their prudence preference (see, e.g. Billio et al (2021)).…”

“…To further assess the potential added value of the Omega ratio, we propose a set of comparisons: first, focusing on the ranking of stocks in the Chinese, US and French databases used in Costola et al (2022); second, we consider a comparison between the indices of the Hedge Fund strategies provided by HFR, and a sample of hedge funds (see Darolles et al (2009) and Billio et al (2021)); finally, we analyze a sample of US equity funds. Table 3 illustrates the various databases (Chinese, US, French stocks, HFR indices, hedge funds and a US equities dataset) the correlations (Pearson, Spearman and regression coefficient) between, in panel A, Sharpe and Omega ratios (for a threshold equal to the risk-free rate); in panel B are the same comparisons for the numerators of both ratios, while panel C is dedicated to the very same comparisons between denominators.…”

“…Chan and Nadarajah (2019)). Among these various topics, a relatively wide stream of the financial economics literature focuses on financial performance measures with two main motivations: the introduction of measures capturing both investors' preferences and stylized facts of financial returns such as asymmetry or non-Gaussian densities, among many others (see Billio et al (2021)); the use of performance measures in empirical studies dealing with managed portfolio evaluation or asset allocation. The interest in this field of research began with the seminal contribution of Sharpe (1966).…”