When Does the Choice of Performance Measure Not Matter?
13 Pages Posted: 28 Nov 2009 Last revised: 10 Jun 2013
Date Written: November 26, 2009
Abstract
We analyze the Sharpe ratio and 14 alternative reward-to-risk ratios. Every alternative ratio leads to the same ranking of investment funds as the Sharpe ratio if the funds’ return distributions satisfy the location and scale condition (see Meyer, 1987). It then makes no difference whether funds are ranked with the Sharpe ratio or an alternative ratio.
Keywords: Asset management; Performance measurement, Performance, Sharpe ratio, Location and scale condition
JEL Classification: D81, G10, G11, G23, G29
Suggested Citation: Suggested Citation
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