Great Investors: Their Methods, Results and Evaluation

Posted: 16 Jan 2012 Last revised: 6 Jul 2012

See all articles by Olivier Gergaud

Olivier Gergaud

Kedge - Bordeaux Business School

William T. Ziemba

University of British Columbia (UBC) - Sauder School of Business; Systemic Risk Centre - LSE

Date Written: January 10, 2012

Abstract

We discuss the records of some great investors and hedge fund managers. Their graphs of wealth over time leads us to a search for smooth monotone paths and how we might fairly evaluate superior as opposed to average investors. Some investors prefer high long run growth and accept bumps, rather than smooth wealth paths and lower growth. These include some Kelly criterion investors such as Buett, Keynes and Soros who have concentrated portfolios with few asset positions. Earlier, Ziemba (2005), following an idea in Ziemba and Schwartz (1991), proposed a modification of the ordinary normal distribution based Sharpe ratio to evaluate right skewed great investor portfolios. This measure only counts losses and is useful in evaluating superior investors such as the Renaissance Medallion hedge fund which has a high rating by the modified downside symmetric Sharpe ratio as opposed to a modest rating with the ordinary Sharpe ratio. Using the University of Massachusetts hedge fund database, we show some funds with superior records and from this evaluation learn more about the properties of the DSSR and the modified downside symmetric information ratio (DISR).

Suggested Citation

Gergaud, Olivier and Ziemba, William T., Great Investors: Their Methods, Results and Evaluation (January 10, 2012). Available at SSRN: https://ssrn.com/abstract=1985647 or http://dx.doi.org/10.2139/ssrn.1985647

Olivier Gergaud (Contact Author)

Kedge - Bordeaux Business School ( email )

Domaine de Luminy - BP 921
BP 921
Marseille, PACA 13288
France

William T. Ziemba

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-261-1343 (Phone)
604-263-9572 (Fax)

HOME PAGE: http://williamtziemba.com

Systemic Risk Centre - LSE ( email )

Houghton St, London WC2A 2AE, United Kingdom

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