An Alternative Performance Measure

Hocquard, Alexandre; Papageorgiou, Nicolas A.; Remillard, Bruno

doi:10.2139/ssrn.1729772

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An Alternative Performance Measure

53 Pages Posted: 23 Dec 2010

See all articles by Alexandre Hocquard

Alexandre Hocquard

Fiera Capital; HEC Montreal - Department of Finance

Bruno Remillard

Department of Decision Sciences, HEC Montreal

Date Written: October 7, 2009

Abstract

In this paper, we present a new alternative performance measure (APM) which evaluates not only for the marginal distribution of a given fund but also its’ dependence (correlation) with a reference portfolio. This performance measure is of particular value in assessing hedge fund return as the latter are selected not only for yield enhancement but also for their diversification benefits. The methodology is adapted from American option theory and based on earlier work of Dybvig (1988), Kat and Palaro (2005) and Papageorgiou et al. (2008). It offers a unique metric for hedge fund performance evaluation.

Keywords: Hedge Funds, Performance Measure, Bivariate Measure

JEL Classification: G10, G20, G28, C16

Suggested Citation: Suggested Citation

Hocquard, Alexandre and Papageorgiou, Nicolas A. and Remillard, Bruno, An Alternative Performance Measure (October 7, 2009). Available at SSRN: https://ssrn.com/abstract=1729772 or http://dx.doi.org/10.2139/ssrn.1729772