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Small Sample Analysis of Performance Measures in the Asymmetric Response Model

Published online by Cambridge University Press:  06 April 2009

Christian S. Pedersen  and
Stephen E. Satchell
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Abstract

This paper reviews and extends definitions and properties of the three classical performance statistics (the Sharpe Ratio, the Treynor Index, and Jensen's Alpha) by locating them in a more general framework: the Asymmetric Response Mode. This allows various notions of beta, which can be related to downside risk, to be employed, and includes, as special cases, a market timing model and the mean-variance CAPM. Due to the general lack of data on fund performance in practice, our emphasis is on small sample analysis where possible. We illustrate our results empirically using data on 15 U.S.-based emerging markets investment funds.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 35 , Issue 3 , September 2000 , pp. 425 - 450
Copyright
Copyright © School of Business Administration, University of Washington 2000

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Footnotes

*

Pedersen, Oliver, Wyman and Company and Honorary Associate of the Financial Econometrics Project, Department of Applied Economics, Cambridge University; Sagchell, Faculty of Economics and Politics, Cambridge University, Austin Robinson Building, Sidgwick Avenue, Cambridge CB3 9DD, Great Britain. The authors thank Akhtar Siddique (the referee) for helpful comments. This article is completely independent of Oliver, Wyman and Company and the opinions expressed are those of the authors alone.

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