When Does the Choice of Performance Measure Not Matter?

13 Pages Posted: 28 Nov 2009 Last revised: 10 Jun 2013

See all articles by Frank Schuhmacher

Frank Schuhmacher

University of Leipzig

Martin Eling

University of St. Gallen - Institute of Insurance Economics; University of Saint Gallen - School of Finance (SoF)

Date Written: November 26, 2009

Abstract

We analyze the Sharpe ratio and 14 alternative reward-to-risk ratios. Every alternative ratio leads to the same ranking of investment funds as the Sharpe ratio if the funds’ return distributions satisfy the location and scale condition (see Meyer, 1987). It then makes no difference whether funds are ranked with the Sharpe ratio or an alternative ratio.

Keywords: Asset management; Performance measurement, Performance, Sharpe ratio, Location and scale condition

JEL Classification: D81, G10, G11, G23, G29

Suggested Citation

Schuhmacher, Frank and Eling, Martin, When Does the Choice of Performance Measure Not Matter? (November 26, 2009). Available at SSRN: https://ssrn.com/abstract=1513853 or http://dx.doi.org/10.2139/ssrn.1513853

Frank Schuhmacher

University of Leipzig ( email )

04109
Germany

Martin Eling (Contact Author)

University of St. Gallen - Institute of Insurance Economics ( email )

Kirchlistrasse 2
St. Gallen, 9010
Switzerland

University of Saint Gallen - School of Finance (SoF) ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

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