Preface

Sortino, Frank A.; Satchell, Stephen E.

doi:10.1016/b978-075064863-9.50001-3

Cited by 2 publications

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“…Although Roy’s (1952) work has received much less attention than the original Markowitz (1952) approach, his downside risk framework is potentially more relevant to the LIC’s asset allocation decision because, as noted by Bailey (1862) over 150 years ago, of the company’s commitment to meet its periodic contractual obligations to its policyholders. We incorporate this downside risk focus using the Sortino Ratio (Sortino, 2001), which, as shown by Satchell (2001), theoretically supports the LPMCAPM. This ratio uses portfolio returns in excess of a target rate (sometimes referred to as the desired or minimum acceptable rate) as the numerator and the square root of the second lower-partial moment of these returns as defined by the target rate as the denominator.…”

Section: Introductionmentioning

confidence: 65%

The efficacy of life insurance company general account equity asset allocations: a safety-first perspective using vine copulas

2018

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We study the asset allocation decision of a life insurance company’s general account with respect to the possibility of large negative economic shocks and examine how this account is affected by policyholder investment decisions in the company’s separate account. This is accomplished using a performance metric that incorporates downside risk measured using univariate and multivariate extreme value distributions. Because of its well-known price volatility, diversification attributes, and significant weight in the combined general and separate accounts, our primary focus is the company’s equity investments. Although industry asset allocations have varied over the past two decades, we find that the actual allocations to equity in the general account are close to the allocation percentages suggested by our extreme value metrics and both are far below the maximum values indicated by the relevant regulatory bodies.

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Section: Introductionmentioning

confidence: 65%

The efficacy of life insurance company general account equity asset allocations: a safety-first perspective using vine copulas

2018

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“…2. In general, Kappa ratios (see Sortino and Satchell, 2001) are defined as Ri,t−τLPMin(τ)n. The Omega–Sharpe ratio (See Kaplan and Knowles, 2004) uses n=1 (not identical to the definition originally suggested by Shadwick and Keating, 2002), the Sortino ratio (See Sortino and Van der Meer, 1991) n=2 and Kappa 3 (See Kaplan and Knowles, 2004) n=3.…”

Section: Notesmentioning

confidence: 99%

Do performance measures matter for stock mutual funds? An international analysis

Santomil

Fernández

González

2022

IJOEM

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PurposeThe purpose of this study is to evaluate whether the classification of the equity mutual fund depends on the performance measure used.Design/methodology/approachThe sample for this study includes stock mutual funds for the USA, Europe and emerging market economies covering the period 2010 to 2020. Using more than 20 performance measures the results are compared using the Sharpe ratio as the reference.FindingsThe results show that performance measures based on absolute reward–risk ratios like Sortino, Treynor, etc. have similar rankings, because in general the numerator (mean excess return) is the same. However, when the authors employ other types of performance measures, results may be significantly different, especially in the case of metrics for “incremental returns”, i.e. alphas. Focussing on markets, their results show that choosing performance measures is more relevant for emerging markets.Research limitations/implicationsThe sample is only limited to the USA, Europe and the emerging market, and there are other performance metrics in the literature which have not been covered in this work.Practical implicationsThe ordering of equity mutual funds depends on the measure used, specially if investors employ factor models to measure excess returns (alphas). Hence, policy formulation on disclosure of mutual fund performance should encourage the use of several metrics from different families. Investors must be aware of the different rankings made and the most appropriate metrics based on their preferences.Originality/valueThis paper focusses specifically on the effect that performance metrics have on relative fund performance. Previous studies have ignored alpha metrics to rank funds, which are commonly employed by investors. The authors’ study performs an analysis for three different markets considering the two main developed ones (the American and European equity markets), as well as the emerging one, largely ignored until now.

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Preface

Cited by 2 publications

References 0 publications

The efficacy of life insurance company general account equity asset allocations: a safety-first perspective using vine copulas

The efficacy of life insurance company general account equity asset allocations: a safety-first perspective using vine copulas

Do performance measures matter for stock mutual funds? An international analysis

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