Comparing and Selecting Performance Measures for Ranking Assets

35 Pages Posted: 22 Apr 2009 Last revised: 29 Jun 2009

See all articles by Massimiliano Caporin

Massimiliano Caporin

University of Padua - Department of Statistical Sciences

Francesco Lisi

University of Padua - Department of Statistical Sciences

Date Written: April 22, 2009

Abstract

Within an asset allocation framework, when the number of assets is larger than the sample dimension, mean-variance approaches cannot be used due to the limited number of degrees of freedom. In such a situation, performance measures could be used to rank assets, and then select a subset of them for further analysis. However, the financial economics literature proposes dozens of measures, and there is thus a problem: which measures should be considered? Some authors already discussed this topic.

We extend the current literature by enlarging the set of analyzed measures and also by exploiting the possible dynamic evolution of rank correlations. Our analysis is mainly empirical, based on the S&P 1500 constituents, and includes an example of the optimal combination of performance measures for allocating an equity portfolio.

Keywords: performance measurement, rank correlations, selecting performance measures, comparing performance measures, combining performance measures

JEL Classification: G11, C10, C40

Suggested Citation

Caporin, Massimiliano and Lisi, Francesco, Comparing and Selecting Performance Measures for Ranking Assets (April 22, 2009). Available at SSRN: https://ssrn.com/abstract=1393163 or http://dx.doi.org/10.2139/ssrn.1393163

Massimiliano Caporin (Contact Author)

University of Padua - Department of Statistical Sciences ( email )

Via Battisti, 241
Padova, 35121
Italy

Francesco Lisi

University of Padua - Department of Statistical Sciences ( email )

V. Cesare Battisti, 241
Padova, 35122
Italy
+39 049 8274182 (Phone)
+39 049 8274170 (Fax)

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