Investor-Specific Performance Measurement: A Justification of Sharpe Ratio and Treynor Ratio
The International Journal of Finance, 2005, Vol. 17, No. 4, pp. 3671-3691
Posted: 9 Jun 2004 Last revised: 18 Mar 2011
This article defines the investor-specific performance measure ISM necessary for investors in practically relevant decision situations. In such situations a typical investor creates an overall portfolio consisting of three parts: an arbitrary fund, a risk-free asset and an existing, fixed portfolio. Since the ISM is considerably defined by the Sharpe ratio and the Treynor ratio, an economic justification of these traditional performance measures is also presented here.
Keywords: Mutual Funds, Performance Measurement, Sharpe Ratio, Treynor Ratio
JEL Classification: G11
Suggested Citation: Suggested Citation