Manipulation-Proof Performance Measure and the Cost of Tail Risk

17 Pages Posted: 9 Jun 2013

See all articles by Didier Maillard

Didier Maillard

Conservatoire National des Arts et Métiers (CNAM); Amundi Asset Management

Date Written: June 7, 2013


This paper builds on the seminal Goetzmann, Ingersoll, Spiegel and Welch research on Manipulation-Proof Performance Measures (MPPM), with a different purpose. Manipulation of usual performance measures generally goes through taking risk which is not reflected in the second moment measure of return distribution, variance or volatility.

The MPPM corrects the impact of tail risk – negative skewness and kurtosis – taken by a fund manager (not necessarily with the explicit aim to manipulate the performance measures). In our paper, we try to quantify, using a Cornish Fisher technology allowing us to control for tail risk, the impact of such risk on the MPPM.

In that framework, we find that the MPPM effectively does impose a penalty on tail risk. This penalty increases nearly linearly with return kurtosis and return negative skewness. The size of the penalty is rather benign when return volatility is low or the risk parameter is low. It increases substantially for high volatilities and/or high risk parameters.

Keywords: Funds performance, Risk, Tail Risk, Cornish Fisher, Skewness, Kurtosis

JEL Classification: C02, G11, G12, G21

Suggested Citation

Maillard, Didier, Manipulation-Proof Performance Measure and the Cost of Tail Risk (June 7, 2013). Available at SSRN: or

Didier Maillard (Contact Author)

Conservatoire National des Arts et Métiers (CNAM) ( email )

292, rue Saint-Martin
Paris cedex 03, 75141

Amundi Asset Management ( email )

90 Boulevard Pasteur
Paris, 75015

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