When Does the Choice of Performance Measure Not Matter?

Abstract:     
We analyze the Sharpe ratio and 14 alternative reward-to-risk ratios. Every alternative ratio leads to the same ranking of investment funds as the Sharpe ratio if the funds’ return distributions satisfy the location and scale condition (see Meyer, 1987). It then makes no difference whether funds are ranked with the Sharpe ratio or an alternative ratio.

Number of Pages in PDF File: 13

Keywords: Asset management; Performance measurement, Performance, Sharpe ratio, Location and scale condition

JEL Classification: D81, G10, G11, G23, G29

working papers series