Our main goal is the generalization of the approach of Jobson and Korkie (1984) for funds performance evaluation. Therefore, we consider the portfolio selection problem of an investor who faces short sales restrictions when choosing among F different investment funds and assume the investor's utility function to be of the HARA type. We develop a performance measure and discuss its relationships...

Interestingness measures stand as proxy for “real human interest,” but their effectiveness is rarely studied empirically due to the difficulty of obtaining ground-truth data. We propose a method based on learning-to-rank algorithms that enables pairwise rankings collected from domain community members to be used to learn a domain-specific measure. We apply this method to study the interestingne...

The Sharpe ratio is adequate for evaluating investment funds when the returns of those funds are normally distributed and the investor intends to place all his risky assets into just one investment fund. Hedge fund returns differ significantly from a normal distribution. For this reason, other performance measures for hedge fund returns have been proposed in both the academic and practiceorient...

The problem of capital allocation to a set of strategies could be partially avoided or at least greatly simplified with an appropriate strategy approval decision process. This paper proposes such procedure. We begin by splitting the capital allocation problem into two sequential stages: Strategy approval and portfolio optimization. Then we argue that the goal of the second stage is to beat a na...

This paper examines the fundamental building blocks of Sharpe ratio to debate over economic interpretation this well-known tool used measure risk-adjusted performance various financial portfolios and funds. It focuses on expected return an investment versus a benchmark portfolio (or index) return. By leveraging set statements assumptions, I isolate information content as expression from alpha. ...

Mutual fund selection is a notoriously difficult task, because past performance poor predictor of future performance. We propose measure that incorporates simple idea: shrinkage, in the sense Bayes-James-Stein, should be applied to gross return parameters, but not fees, which are known. The proposed Shrinkage Adjusted Sharpe ratio (SAS) substantially improves prediction out-of-sample relative e...

Performance measures such as the Sharpe ratio and the information ratio are estimation subject to estimation error. Lo (2002) derives the explicit expressions for the statistical distribution of the Sharpe ratio. Bertrand and Protopopescu (2007) have extended his work to the bivariate case which corresponds to the Information ratio. In the present paper, we analyze the effects of skewness and k...

Traders in the financial world are assessed by the amount of money they make and, increasingly, by the amount of money they make per unit of risk taken, a measure known as the Sharpe Ratio. Little is known about the average Sharpe Ratio among traders, but the Efficient Market Hypothesis suggests that traders, like asset managers, should not outperform the broad market. Here we report the findin...