Measuring Performance in a Dynamic World: Conditional Mean-Variance Fundamentals

30 Pages Posted: 6 Apr 2009 Last revised: 28 Apr 2009

See all articles by Ranjini Jha

Ranjini Jha

University of Waterloo - School of Accounting and Finance

Bob Korkie

University of Alberta

Harry J. Turtle

Colorado State University, Fort Collins - Department of Finance & Real Estate

Multiple version iconThere are 2 versions of this paper

Date Written: April 6, 2009

Abstract

We develop conditional alpha performance measures that are consistent with conditional mean-variance analysis and the magnitude and sign of the implied true conditional time-varying alphas. The sequence of conditional alphas and betas is estimable from surprisingly simple unconditional regressions. Other common performance measures are derivable from the conditional investment opportunity set based on its conditional asset return moments. Our bootstrap analysis of Morningstar mutual fund returns data demonstrates that the differences between existing conditional alpha measures and our proposed alpha are substantive for typical parameterizations.

Keywords: Conditional performance measurement, Conditional mean-variance analysis, Conditional Jensen's alpha

JEL Classification: D82, G11, G12, G14, G23

Suggested Citation

Jha, Ranjini and Korkie, Robert (Bob) and Turtle, Harry J., Measuring Performance in a Dynamic World: Conditional Mean-Variance Fundamentals (April 6, 2009). Journal of Banking and Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1373836

Ranjini Jha (Contact Author)

University of Waterloo - School of Accounting and Finance ( email )

200 University Avenue West
Waterloo, Ontario N2L 3G1 N2L 3G1
Canada

Robert (Bob) Korkie

University of Alberta ( email )

Edmonton, Alberta
Canada
(780) 982-1141 (Phone)

HOME PAGE: http://www.bus.ualberta.ca/bkorkie/

Harry J. Turtle

Colorado State University, Fort Collins - Department of Finance & Real Estate ( email )

Fort Collins, CO 80523
United States

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