The Impact of Downside Risk on Risk-Adjusted Performance of Mutual Funds in the Euronext Markets

Meer, Robert van der; Sortino, Frank A.; Plantinga, Auke

doi:10.2139/ssrn.277352

Cited by 14 publications

(8 citation statements)

References 12 publications

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“…Dissatisfaction with the variance as a risk measure coupled with other behavioral evidence has led some researchers to propose alternative risk-adjusted performance measures. This note examines two alternative measures of investment performance-the Sortino ratio and the upside potential ratio-and investigates whether the difference in performance reported by Plantinga, van der Meer, and Sortino (2001) is attributable to the skewness of the return distribution. Specifically, this note examines the relationships between the three ratios in terms of portfolio evaluation under a normality assumption and an Edgeworth-Sargan density assumption.…”

Section: Introductionmentioning

confidence: 99%

“…The ratio of the upside potential to the downside risk is termed as the "upside potential ratio." Plantinga, van der Meer, and Sortino (2001) apply the Sharpe ratio, the Sortino ratio, and the upside potential ratio to evaluate mutual fund performance. They demonstrate that the upside potential ratio is a better measure than the Sharpe ratio.…”

Section: Introductionmentioning

confidence: 99%

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A note on the relationships between some risk‐adjusted performance measures

Lien

2002

Journal of Futures Markets

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Assuming portfolio returns are normally distributed, it is shown that both Sortino ratio (SR) and upside potential ratio (UPR) are monotonically increasing functions of the Sharpe ratio. As a result, all three risk‐adjusted performance measures provide identical ranking among investment alternatives. The effects of skewness and kurtosis are then evaluated within the Edgeworth‐Sargan density family. For the Sortino ratio, the above conclusion remains valid in the presence of negative skewness or excessive kurtosis. Similar results apply to the UPR with modifications. For all other cases, both SR and UPR provide exactly opposite ranking among investment alternatives to that suggested by the Sharpe ratio when the Sharpe ratio is large. Applications to futures hedging are discussed. Specifically, it is found that the Sharpe ratio may frequently lead to a smaller futures position than the other two ratios. © 2002 Wiley Periodicals, Inc. Jrl Fut Mark 22:483–495, 2002

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

A note on the relationships between some risk‐adjusted performance measures

Lien

2002

Journal of Futures Markets

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“…However, the resulting depicted level of risk is far from complete. This has already been covered in various publications (Sortino and van der, 1991;Sortino and Forsey, 1996;Sortino et al, 1999;Plantinga et al, 2001;van Polanen Petel, 2005;Keeris, 2006). The objections looked at more closely below are attempts not only to highlight the problems of the usual methods of analysis, but -and this is what really matters -to find solutions for achieving a clearer picture of the return/risk profile, in order to be able to take investment decisions based on objective information.…”

Section: Objections To the Standard Deviation As A Measure Of Risk In Property Investmentsmentioning

confidence: 83%

Return/risk profile focused ratios for property investments

Keeris

Langbroek²

2009

Journal of European Real Estate Research

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Purpose -In order to take properly founded investment decisions, the anticipated value creation of a property investment should be identified by the investor. Because usual methods of analysis for determining the return/risk profile produce an inaccurate and incomplete picture, the purpose of this paper is to propose a number of improvements. Design/methodology/approach -By examining the framework on which most used statistical risk analyses are based, improvements can be made, based on known, but not commonly used approaches. These improvements give a more satisfying risk analysis result, in which chances are also made visible. Findings -Main principle of use is the downside risk approach, which only takes into account the negative deviations from self-determined return criteria. The analysis is then based on four new created ratios, which collectively provide a better and more complete picture of the return/risk profile as a whole. Practical implications -The ratios address risk from a downside perspective, but they also take into account the chances for investors to meet the return criteria, which provide the upside potential for the investments. Furthermore, the ratios express risk in terms of real volatility of the actual return. And last, they provide improvement of the entire return/risk profile, which therefore highlights the value creation achieved by the management. Originality/value -By using the proposed ratios, risks and chances associated with property investments can be better quantified, thus producing a return/risk profile that paints a more realistic picture of the degree of value creation for investors.

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“…The share of assets owned by investment funds in the total assets of financial institutions has doubled, but continues to be minimal 0.2% [14].…”

Section: Introductionmentioning

confidence: 99%

Statistical analyses of the performance of Macedonian investment and pension funds

Taleski

Bogdanovski²

2015

Croat. Oper. Res. Rev.

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Abstract. The foundation of the post-modern portfolio theory is creating a portfolio based on a desired target return. This specifically applies to the performance of investment and pension funds that provide a rate of return meeting payment requirements from investment funds. A desired target return is the goal of an investment or pension fund. It is the primary benchmark used to measure performances, dynamic monitoring and evaluation of the risk-return ratio on investment funds. The analysis in this paper is based on monthly returns of Macedonian investment and pension funds (June 2011 -June 2014. Such analysis utilizes the basic, but highly informative statistical characteristic moments like skewness, kurtosis, Jarque-Bera, and Chebyishev's Inequality. The objective of this study is to perform a trough analysis, utilizing the above mentioned and other types of statistical techniques (Sharpe, Sortino, omega, upside potential, Calmar, Sterling) to draw relevant conclusions regarding the risks and characteristic moments in Macedonian investment and pension funds. Pension funds are the second largest segment of the financial system, and has great potential for further growth due to constant inflows from pension insurance. The importance of investment funds for the financial system in the Republic of Macedonia is still small, although openend investment funds have been the fastest growing segment of the financial system. Statistical analysis has shown that pension funds have delivered a significantly positive volatility-adjusted risk premium in the analyzed period more so than investment funds.

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The Impact of Downside Risk on Risk-Adjusted Performance of Mutual Funds in the Euronext Markets

Cited by 14 publications

References 12 publications

A note on the relationships between some risk‐adjusted performance measures

A note on the relationships between some risk‐adjusted performance measures

Return/risk profile focused ratios for property investments

Statistical analyses of the performance of Macedonian investment and pension funds

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