Portfolio Performance Gauging in Discrete Time Using a Luenberger Productivity Indicator

27 Pages Posted: 27 Mar 2009 Last revised: 5 Jun 2020

See all articles by Olivier Brandouy

Olivier Brandouy

University of Angers - Groupe de Recherche en Économie Théorique et Appliquée (GREThA)

Walter Briec

University of Perpignan

Kristiaan Kerstens

CNRS-LEM (UMR 9221); Catholic University of Lille - IESEG School of Management

I. Van de Woestyne

Hogeschool-Universiteit Brussel (HUBrussel)

Date Written: March 27, 2009

Abstract

This paper proposes a pragmatic, discrete time indicator to gauge the performance of portfolios over time. Integrating the shortage function (Luenberger, 1995) into a Luenberger portfolio productivity indicator (Chambers, 2002), this study estimates the changes in the relative positions of portfolios with respect to the traditional Markowitz mean-variance efficient frontier, as well as the eventual shifts of this frontier over time. Based on the analysis of local changes relative to these mean-variance and higher moment (in casu, mean-variance- skewness) frontiers, this methodology allows to neatly separate between on the one hand performance changes due to portfolio strategies and on the other hand performance changes due to the market evolution. This methodology is empirically illustrated using a mimicking portfolio approach (Fama and French 1996; 1997) using US monthly data from January 1931 to August 2007.

Keywords: shortage function, mean-variance, mean-variance-skewness, efficient portfolios, Luenberger portfolio productivity indicator

JEL Classification: C43, G11

Suggested Citation

Brandouy, Olivier and Briec, Walter and Kerstens, Kristiaan and Van de Woestyne, Ignace, Portfolio Performance Gauging in Discrete Time Using a Luenberger Productivity Indicator (March 27, 2009). Journal of Banking and Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1369223 or http://dx.doi.org/10.2139/ssrn.1369223

Olivier Brandouy (Contact Author)

University of Angers - Groupe de Recherche en Économie Théorique et Appliquée (GREThA) ( email )

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France

Walter Briec

University of Perpignan ( email )

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Perpignan 66860
France
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+33 468662217 (Fax)

Kristiaan Kerstens

CNRS-LEM (UMR 9221) ( email )

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Lille Cedex, 59016
France

Catholic University of Lille - IESEG School of Management ( email )

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Lille, 59000
France

Ignace Van de Woestyne

Hogeschool-Universiteit Brussel (HUBrussel) ( email )

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