Posted: 11 Sep 2008
Date Written: September 10, 2008
A frequent comment is that investment funds with a nonnormal return distribution cannot be adequately evaluated by using the classic Sharpe ratio. Research on hedge fund data that compared the Sharpe ratio with other performance measures, however, found virtually identical rank ordering by the various measures. The study reported here analyzed a dataset of 38,954 funds investing in seven asset classes over 1996-2005 and found that the previous result is true not only for hedge funds but also for mutual funds investing in stocks, bonds, real estate, funds of hedge funds, commodity trading advisers, and commodity pool operators. In short, choosing a performance measure is not critical to fund evaluation and the Sharpe ratio is generally adequate.
Keywords: Performance Measurement and Evaluation: Performance Measurement, Performance Attribution
Suggested Citation: Suggested Citation
Eling, Martin, Does the Measure Matter in the Mutual Fund Industry? (September 10, 2008). Financial Analysts Journal, Vol. 64, No. 3, 2008. Available at SSRN: https://ssrn.com/abstract=1266187