28 Pages Posted: 27 Jun 2008 Last revised: 15 Jun 2015
Date Written: July 1, 2008
This paper introduces a new fund performance measure, called the L-performance. It is proposed as an alternative to the Sharpe performance measure that is commonly used for fund performance valuation despite its inability to account for skewness and thick tails of fund return distributions. The L-performance improves upon the Sharpe measure in this respect. Technically, the L-performance is based on sample statistics, called L-moments, which are conceptually close to the conventional power moments, but provide more detailed information about the extremes. For this reason, the L-moments are used for prediction and assessment of extreme events, such as floods and earthquakes. In this paper, the new L-performance measure is calculated for a variety of hedge funds and is used to derive a fund ranking.
Keywords: Hedge Fund, Sharpe Performance, L-moment, Distortion Risk Measure, Ranking
Suggested Citation: Suggested Citation
Gourieroux, Christian and Jasiak, Joann and Darolles, Serge, L-Performance with an Application to Hedge Funds (July 1, 2008). Available at SSRN: https://ssrn.com/abstract=1151835 or http://dx.doi.org/10.2139/ssrn.1151835