Volatility-Adjusted Performance: An Alternative Approach to Interpret Long-Run Returns

WP EFMA Athens 2000

38 Pages Posted: 21 Jun 2000

See all articles by Jan Bo Jakobsen

Jan Bo Jakobsen

Copenhagen Business School

Torben Voetmann

The Brattle Group; University of San Francisco

Date Written: January 2000


This paper demonstrates the advantages of using volatility-adjusted performance measures compared to buy-and-hold returns to interpret long-run returns. We arrive at the volatility-adjusted performance measure by decomposing the expected cross-sectional buy-and-hold returns into transformed mean components and volatility components. This decomposition shows that due to Jensen's inequality the volatility component contributes positively to the right-skewed buy-and-hold returns. The significance of the volatility-adjusted performance measure is improved testing of long-run returns.

JEL Classification: G14, G32

Suggested Citation

Jakobsen, Jan Bo and Voetmann, Torben, Volatility-Adjusted Performance: An Alternative Approach to Interpret Long-Run Returns (January 2000). WP EFMA Athens 2000. Available at SSRN: https://ssrn.com/abstract=233116 or http://dx.doi.org/10.2139/ssrn.233116

Jan Bo Jakobsen (Contact Author)

Copenhagen Business School ( email )

Solbjerg Plads 3
Dept. of Finance
DK - 2000 Frederiksberg
+45 38 153 619 (Phone)
+45 38 153 600 (Fax)

Torben Voetmann

The Brattle Group ( email )

201 Mission Street
Suite 2800
San Francisco, CA 94105
United States
415-217-1000 (Phone)

HOME PAGE: http://www.brattle.com

University of San Francisco ( email )

2130 Fulton Street
San Francisco, CA 94117
United States

Register to save articles to
your library


Paper statistics

Abstract Views
PlumX Metrics