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Volume 32 Number 3 March 2008 |
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The Efficacy of the Sortino Ratio and Other Benchmarked Performance Measures Under Skewed Return Distributions |
| Ashraf Chaudhry Helen L. Johnson |
Abstract |
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This paper investigates the suitability of existing performance measures under the assumption of a clearly defined benchmark. A range of measures are examined including the Sortino Ratio, the Sharpe Selection ratio (SSR), the Student's t-test, and a decay-rate measure. A simulation study is used to assess the power and bias of these measures based on variations in sample size and mean performance of two simulated funds. The Sortino Ratio is found to be the superior performance measure, exhibiting more power and less bias than the SSR when the distribution of excess returns are skewed.
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Keywords |
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SORTINO RATIO; SHARPE SELECTION RATIO; POWER; BIAS; SKEWED; BOOTSTRAP.
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Contact DetailsAshraf ChaudhryQueensland Investment Corporation, Brisbane, QLD, 4001. Helen L. Johnson Queensland University of Technology, Brisbane, QLD, 4001. Email: h.johnson@qut.edu.au |
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This page was last updated in May 2008. Copyright © The University of New South Wales Phone: +61 2 9931 9200; Email: eajm@agsm.edu.au |