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- Assessing Risk-adjusted Rate of Return
- Risk-adjusted Rate of Return is a performance measure that adjusts for the initial risk an investor takes at the time of a purchase.Every investor works with risk, but if they can quantify it, they should be able to make more informed decisions about which risks are worth taking. Calculating risk-adjusted...
- Articles 2007-12-12
- Hormones, Incentive "make Best Traders"
- By Kate KellandLONDON (Reuters UK) - British scientists say a perfect combination of testosterone, experience and a hunger for a share of profits can produce financial traders who consistently outperform the market -- even during a crisis.Researchers from Cambridge University who studied 53 traders from the City of London financial...
- News items 2009-11-25
- Sharpening The Sharpe Ratio
- The question that article address is what happens when "excess returns" head south? Well, investors start bailing out and the Sharpe ratio is harder to interpret. Excess return is typically calculated by subtracting the T-bill rate of return from the asset being analyzed. The higher the Sharpe ratio the better....
- White papers 2003-01-01
- Sharpe And To The Point
- The Sharpe Ratio is a "compact" statistic for simultaneously considering risk and return. It is compact in that its calculation is (1) very straightforward and (2) it does not involve obscure variables. Devised by William Sharpe, it is calculated as shown below by dividing the excess return of an asset...
- White papers 2001-10-01
- The Perception Of Time, Risk And Return During Periods Of Speculation
- This paper has derived the consequences of two hypotheses for the relationship between risk and return. The first hypothesis states that assets with the same risk must have the same expected return. From this, one derives the well-known invariance of the Sharpe ratio for uncorrelated stocks, as well as the...
- White papers 2002-01-10
- The Last Great Arbitrage: Exploiting the Buy-And-Hold Mutual Fund Investor
- This paper demonstrates that an institutional feature inherent in a multitude of mutual funds managing billions in assets generates fund NAVs that reflect stale prices. Since, in many cases, investors can trade at these NAVs with little or no transactions costs, there is an obvious trading opportunity. Simple, feasible strategies...
- White papers 2000-05-08
Additional Resources
- Sharpe, Treynor And Jensen's Ratios
- This article tries to discuss Sharpe, Treynor and Jensen's Ratios, which are used in the portfolio management. Sharpe ratio measures the return earned in excess of the risk free rate on a portfolio to the portfolio's total risk as measured by the standard deviation in its returns over the measurement...
- White papers 2003-01-01
- Performance Of Leveraged Asset Funds
- Leverage plays an important role in the practice of today's portfolio management industry. Leverage can be part of the funds' investment policy, long term strategy, or can be employed to meet temporary liquidity demand. Although the non-normality created by leverage is much the same than those created by options, its...
- White papers 2001-11-01
- The Upside Potential Strategy: A Paradigm Shift in Performance Measurement
- The thesis of this paper is that popular performance measures, like the Sharpe ratio and information ratio, are not designed for the clients needs. The "one size fits all" approach of these ratios does not recognize the fact that the clients have different ages, different amounts of wealth and different...
- White papers 2003-01-01
- Prospect Theory And Liquidation Decisions
- This paper solves a liquidation problem for an agent with a preference consistent with the prospect theory of Kahneman and Tversky (1979). According to these preferences, the agent's value function depends on his wealth change relative to a reference point, around which the agent is more sensitive to losses than...
- White papers 2003-03-01
- Portfolio performance: illustrations from Morningstar.
- ABSTRACT. Measures of portfolio performance, such as the Sharpe ratio and Jensen's alpha, are commonly taught in investment and portfolio management courses that use hypothetical examples. Using the Morningstar Web site, the author of this article ABSTRACT. Measures of portfolio performance, such as...
- Research articles 2002-03-01
- The Sharpe and the flat: funds measured by unit of risk.(money market funds)
- The Sharpe and the flat: funds measured by unit of risk GLOBAL EMERGING MARKETS ...
- Research articles 1999-09-27
- Mutual Fund Performance and Seemingly Unrelated Assets
- Estimates of standard performance measures can be improved by using returns on assets not used to define those measures. Alpha, the intercept in a regression of a fund's return on passive benchmark returns, can be estimated more precisely by using information in returns on non-benchmark passive assets, whether or not...
- White papers 2001-04-01
- Hedge Fund Strategy Performance: Using Conditional Approaches
- The search for methodologies that accurately measure performance and performance persistence continues to evolve. This is especially true for investment strategies such as hedge funds, which have been shown, in several instances, not to be normally distributed. This article evaluates performance of hedge funds using conditional approaches and GMM. Unlike...
- White papers 2003-04-01
- The Benefits Of Hybrid Mutual Funds
- The Article explains the study, which provides important information to the investment community about the benefits of hybrid mutual funds: First, hybrid mutual funds provide small investors a unique risk-return opportunity not usually provided by most of the traditional investment vehicles. Some of these funds are even able to offer...
- White papers 2003-05-01
- Measuring Risk-Adjusted Returns In Alternative Investments
- Academic criticism of the Classic Capital Asset Pricing Model CAPM performance measures is not new. In particular, several authors have pointed out the shortcomings of using both the Sharpe ratio for performance evaluation and the mean-variance framework for portfolio construction when the underlying investments have highly non-symmetric distributions. This article,...
- White papers 2002-06-20
- Incentive Contracts and Hedge Fund Management
- This paper investigates dynamically optimal risk-taking by an expected-utility maximizing manager of a hedge fund. The paper examines the effects of variations on a compensation structure that includes a percentage management fee, a performance incentive for exceeding a specified high water mark, and managerial ownership of fund shares. The paper...
- White papers 2004-05-12
- The Performance of International Portfolios
- This paper evaluates the performance of U.S. investors' portfolios in the equities of over 40 countries over a 25-year period. We find that these portfolios achieved a significantly higher Sharpe ratio than foreign benchmarks, especially since 1990. We uncover three potential reasons for this success. First, U.S. investors abstained from...
- White papers 2004-08-01
- Alternative Performance Measures for Hedge Funds
- This article shows higher moments matter when performance of hedge funds has to be evaluated. When using the Sharpe ratio, some investments may mistakenly appear better or worse than they are, because not all the risk characteristics are taken into account. That is why the paper advocates the use of...
- White papers 2003-06-01
- Risk and Valuation Under an Intertemporal Capital Asset Pricing Model
- The paper analyzes the risk characteristics and the valuation of assets in an economy in which the investment opportunity set is described by the real interest rate and the maximum Sharpe ratio. It is shown that, holding constant the beta of the underlying cash flow, the beta of a security...
- White papers 2003-06-21
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