A Survey on the Four Families of Performance Measures

Caporin, Massimiliano; Jannin, Gregory Mathieu; Lisi, Francesco; Maillet, Bertrand

doi:10.2139/ssrn.2115399

Cited by 10 publications

(6 citation statements)

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“…Note that due to the presence of negative average returns, the traditional Sharpe ratio turned out to be inappropriate for comparisons across allocation strategies, models, periods and hedging presence. In fact, given two assets, A and B, with the same negative average return, say -1%, and the volatility of A twice the volatility of B, 20% and 10%, respectively, the Sharpe ratio of A would be higher than that of B, -0.05 versus -0.1 (see Caporin et al, 2012 for additional comments). To overcome this limitation, we considered the modified Sharpe of Israelsen (2005) where the average returns are multiplied by the volatility if it is negative, thus restoring the appropriate ordering.…”

Section: In-sample Resultsmentioning

confidence: 99%

Currency Hedging Strategies, Strategic Benchmarks and the Global and Euro Sovereign Financial Crises

2013

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This paper investigates dynamic currency hedging benefits, with a further focus on the impact of currency hedging before and during the recent financial crises originated from the subprime and the Euro sovereign bonds. We take the point of view of a Euro-based institutional investor who considers passive investment strategies in portfolios holding European, British and US assets. We analyze the impact of the model specification to improve the risk-return tradeoff when currency risk is hedged. Hedging strategies of currency risk, using exchange rates futures and driven by several multivariate GARCH models, depend on the portfolio composition and period analyzed. Dynamic covariance models provide limited evidences of a decrease in hedging rations compared to naïve hedging strategies based on linear regressions or variance smoothing. Nevertheless, those results are coupled with better performances of dynamic covariance models in terms of hedging effectiveness an improved Sharpe ratios. The empirical evidences are observed both in-sample as well as in an out-of-sample exercise.

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Section: In-sample Resultsmentioning

confidence: 99%

Currency Hedging Strategies, Strategic Benchmarks and the Global and Euro Sovereign Financial Crises

2013

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“…We stress that while (10a) resemble tail-based risk measures, and is not a proper absolute performance measure, see Caporin et al (2014), indicator (11) is novel. It is interesting to notice that Ψ 2 (R p , ψ)…”

Section: Portfolio Performance As Function Of Quantiles Levelsmentioning

confidence: 99%

Asset allocation strategies based on penalized quantile regression

2017

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It is well known that quantile regression model minimizes the portfolio extreme risk, whenever the attention is placed on the estimation of the response variable left quantiles. We show that, by considering the entire conditional distribution of the dependent variable, it is possible to optimize different risk and performance indicators. In particular, we introduce a risk-adjusted profitability measure, useful in evaluating financial portfolios under a pessimistic perspective, since the reward contribution is net of the most favorable outcomes. Moreover, as we consider large portfolios, we also cope with the dimensionality issue by introducing an ℓ 1 -norm penalty on the assets weights.

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“…Some examples of one-sided PMs are the adjusted for skewness Sharpe ratio (ASSR) proposed by Zakamouline and Kokebakker (2009), the Generalized Rachev family based on the conditional Value at Risk (Biglova et al 2004), the Farinelli-Tibiletti (FT) family based on both upper and lower partial moments and the Kappa or S-S family (Sortino and Satchell, 2001) based on lower partial moments. Other alternative reward-to-variability ratios are well documeted in Caporin et al (2014) and the references therein. We will also implement PMs based on the certainty equivalent amount as a function of both prudence and temperance coefficients.…”

Section: Introductionmentioning

confidence: 99%

One-Sided Performance Measures Under Gram-Charlier Distributions

León

Moreno

2016

SSRN Journal

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We derive closed-form expressions for risk measures based on partial moments by assuming the Gram-Charlier (GC) density for stock returns. As a result, the lower partial moments (LPM) can be expressed as linear functions on both skewness and excess kurtosis. Under this framework, we study the behaviour of portfolio rankings with performance measures based on partial moments, that is, both Farinelli-Tibiletti and Kappa ratios. Contrary to previous results, significant differences are found in ranking portfolios between the Sharpe ratio and the FT family. We also obtain closed-form expressions for LPMs under the semi non-parametric (SNP) distribution which allows higher flexibility (in terms of third-and fourth-order moments) than the GC distribution.

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A Survey on the Four Families of Performance Measures

Cited by 10 publications

References 0 publications

Currency Hedging Strategies, Strategic Benchmarks and the Global and Euro Sovereign Financial Crises

Currency Hedging Strategies, Strategic Benchmarks and the Global and Euro Sovereign Financial Crises

Asset allocation strategies based on penalized quantile regression

One-Sided Performance Measures Under Gram-Charlier Distributions

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