L-Performance with an Application to Hedge Funds

28 Pages Posted: 27 Jun 2008 Last revised: 15 Jun 2015

Christian Gourieroux

University of Toronto - Department of Economics; Center for Interuniversity Research and Analysis on Organization (CIRANO); Ecole Nationale de la Statistique et de l'Administration Economique (ENSAE); National Bureau of Economic Research (NBER)

Joann Jasiak

York University - Department of Economics

Serge Darolles

Université Paris Dauphine - DRM-CEREG

Date Written: July 1, 2008

Abstract

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

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

Christian Gourieroux

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S 3G7
Canada
416-978-4349 (Phone)
416-978-6713 (Fax)

Center for Interuniversity Research and Analysis on Organization (CIRANO) ( email )

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Montreal, Quebec H3C 3J7
Canada

Ecole Nationale de la Statistique et de l'Administration Economique (ENSAE) ( email )

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92245 Malakoff Cedex
France
33.4117.7666 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Joann Jasiak

York University - Department of Economics ( email )

4700 Keele St.
Toronto, Ontario M3J 1P3
Canada
416-736-2100 EX77045 (Phone)
416-736-5987 (Fax)

Serge Darolles (Contact Author)

Université Paris Dauphine - DRM-CEREG ( email )

place du Maréchal de Lattre de Tassigny
cedex 16
Paris, 75775
France

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